Is the recession really over?
It was a question that was asked at least twice on the Sunday talk shows this past weekend. Depending on who you were talking to, you could have received a couple of different answers. Larry Summers, who is the top economic adviser to the White House was asked that question on ABC’s This Week and he said everyone agrees that the recession is over, even though they expect unemployment to climb higher than the current 10%. Christina Romer, who chairs the White House Council of Economic Advisers, evidently didn’t get the memo, as she has been saying that “of course, the recession isn’t over”.
While I am certainly not an economic expert, I can tell you how if feels in the Oklahoma/Arkansas area. That is to say, it does not feel like the recession is over. Our business is still drastically under what it would normally be this time of the year and we are faced with taking off an extra day each week, in order to make sure there is very little overtime, if any. After such a time as we have seen in the last couple of years, that is to be expected, I suppose. One thing that is not going to happen overnight is an economic recovery.
There are positive signs, with new unemployment claims dropping in a big way last month. That
means fewer people are loosing their jobs. That could be due to some temporary holiday hiring and if it is, we should see signs of that in January, as those temporary employees are let go. Some key economic indicators are showing that the economy is expanding again, but I would not expect to see real results until sometime next year. In other words, do not expect to see any major growth in the jobs area until then, if it happens at all.
There is one issue that I am concerned about for next year, namely taxes. The tax cuts George W. Bush pushed through Congress are set to expire and the current administration is showing no signs of extending them. That could have a negative impact on the economy as those are phased out. There is also the issue of the “Making Work Pay” tax credit and how it was implemented. I have been told by my tax professional that there may be a lot of Americans who will find themselves owing money to the IRS because of this credit.
I also know that my employer is very concerned about some of the taxes on small business that are going into effect. He thought he was going to be immune to some of them because he makes under the $250,000 starting point so often mentioned by President Obama, but that does not appear to be the case. He has been paying down his debt and he has been told by his accountant that he is going to have to borrow money to make improvements on the business. Otherwise, he will be faced with paying a very high tax rate to the IRS. They are not rewarding him for being responsible and paying down his debt (I think it would be safe to say they are penalizing him) and they will not reward him for hiring more employees during the recession, which he has done. They will however, reward him for going even further into debt.
It’s a simple question, really and one that has been asked more than once or twice in the last part of 2009. It may be in the eye of the beholder, so let me ask you this. As 2009 gets ready to yield to 2010, how does it feel to you? Is the recession really over?
There are always service industry jobs around here since there is a large military population. But the textile and furniture industry is totally ruined, never to return from China. How did that happen? It’s that “new world order” Papa Bush touted nearly 20 yrs. ago, huh?
Tax cuts are the solution Larry? Really now, i heard the calls for deficit reduction (a deficit that began well, right after “W” took office!)……….but is that really the answer? We were promised that when “W” presented the American people with his tax cuts for the rich, that the deficit that was predicted wouldn’t occur due to some kinda magic due to more taxes being paid by growth of business. Didn’t happen. Let the rich pay their fair share, and coerce the banks to lend out some of that cash they’re sitting on to stimulate small business growth. And lets get some road building contracts let! Perhaps i could get a loan to start a highway construction job…….
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David,
As near as I can tell, I didn’t say tax cuts were the solution. I was merely making the observation that the Bush tax cuts were going to be allowed to expire. As for them being tax cuts for the rich, I would counter that they were tax cuts for the people who were actually paying taxes. Compare that to the Obama tax credits, where those who do not pay taxes received money as well. There is a difference, in my honest opinion.
I can promise you this. If Obama has his way, small business will be suffering greatly. I am seeing signs of that already, being an employee of a small business and knowing some of what is happening with the business.
I am all for everyone paying their fair share, including the rich, but I am not convinced the rich do not already do that. At least to some degree. What I would really like to see is a different kind of tax system that is much simpler; ie. a tax system that could not be manipulated by Congress and whomsoever is able to hire a tax lawyer or high powered accountant.
I love it when those in the administration are not marching in lock step—gives me reason to hope. Economists like all other professionals disagree about everything so that is not surprising. Each person will judge the economy on whats happening in his personal life, not by what someone in Washington is telling him. If you are doing well the economy if fine and if not its……. As the numbers of those getting pink slips slowing I have no doubt about that. Those that had jobs that were shakey to begin with are now unemployed and as those fell into the ranks of the unemployed the numbers in that group decreased and there are fewer left in those groups now so the rate is now slowing. This slowing rate is NOT a sign of improvement, but just a natural process—less water in the leaky barrel so the leak slows.
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A big part of our problem is our focus on stupid economic indicators. We view two things for the most part as telling the whole story: the unemployment figure and the stock market.
First, the unemployment figure is manipulated. It was changed in the early 1990’s to be much more “pretty” where 10% unemployment today is more like 15-17% unemployment prior to 1990. The government wants the picture to be rosy. Why? Re-election. Also, jobs are not the most important thing we should be focused on even though it is what most people focus on. If everyone worked a job digging holes and then filling them back up, that is not good for the economy. Even if the result was 0% unemployment. Get it? The jobs have to serve a productive capacity otherwise it’s a waste.
A few years ago, unemployment was low but almost everyone was in a service based jobs such as home builders, mortgage brokers and so forth. We saw how that turned out…
Second, the stock market can also be manipulated based on Wall St. firms and government action. Easy monetary policy can cause asset prices to shoot up including stocks. This doesn’t necessarily mean a healthy economy. Also, if stocks are rising but the dollar is losing value (the story of 2009), it doesn’t necessarily mean a healthy economy.
Our economy should be measured by the productive capacity of our economy, our exports that bring wealth into the country, the strength of our currency, and rising profitability of American businesses. Let’s see.. productive capacity has been going down for years, we import WAY more than we export and our currency is plummeting.
Regardless of who is President, combined with the ‘do nothing good’ Congress…I believe the dollar will cease to exist and ‘New World Order’ will be controlling the U.S. within the next 2 to 4 years.
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Wally,
Thanks for commenting on Political Realities.
I have felt for quite some time that our economy has entirely too many jobs based in the financial sector than is healthy. I am not familiar enough with the situation to know how or why that has happened,but I do know we seem to have a lot of jobs that are focused on things that are not necessarily productive for our country. Could it be that is one reason our economy is in the shape it is in right now?
I have never been able to understand the fascination with the stock market. I may have a simpleton’s way of looking at things, but when everyone was running around worrying about how the stock market crashed, I wondered what the fuss was all about. People still have to go to work, pay their bills, buy groceries, get their cars repaired, etc. etc. etc. When we start pulling back on those necessary items is when our economy really starts to suffer. Maybe we should stop looking at the stock market every day and just continue to live our lives.
I do not think that the recession is over, I think that Larry Summers was trying to make the president look good, but Romer let the cat out of the bag. I think that you bring up several points that should make Americans leery about the economy going forward.
The expiration of the Bush tax cuts are not going to help the economy, if Obama thought they would, I would think that he would have had legislation passed to end them immediately. I also think that businesses are not going to hire people until after they find out what their total tax burden is going to be. With cap and trade, and healthcare reform amounting to a tax on businesses they are going to have to wait to see what their operating costs are going to be under this administration’s taxes before they can decided whether they can afford to hire people. Like you I am not expert but it seems to me there is too much uncertainty in the air right now.
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