Monday, September 20, 2010

NBER Says Recession Over, But Woes Remain Prevalent

The independent body that determines when the nation is or isn't in a recession has declared that the recession ended June 2009. The NBER, which said that the recession began November 2007, announced today that the longest post-World War 2 recession ended in June of 2009.

That's both good and bad news.

Here's the good news - we should be seeing improved economic conditions.

Here's the bad. We aren't, and moreover, the so-called stimulus package had nothing to do with ending the recession or improving the economy as the proponents had long claimed (or more like hoped).

The ARRA of 2009 (the stimulus package) was passed in February 2009. The recession ended in June 2009. That means that only a fraction of the package was spent in four months - and that the economy was already improving even as the ink was drying on the stimulus package according to the NBER, which made the determination that the economy was growing sufficiently to call the recession over in 2009.

Now, the economic conditions are ripe for a double-dip, and the growth has been tepid even as unemployment remains significantly higher than the pre-recession levels. Throw in the ongoing real estate woes, and the economic situation remains extremely troublesome for the White House and Democratic chances to maintain their strong majority in Congress. So, while Wall Street has managed to recover quite a bit of the losses from the lows, it is still about 40% lower than its peak levels before the recession.

It's little wonder then that President Obama is busy trying to convince the American people that his policies have led to improvements, but you can't point to his economic policies when there was an upward trajectory before his centerpiece bill - the ARRA of 2009 - was enacted.

Some parts of the country are still mired in the depths of a recessionary environment, while other areas are slightly more stable. States that led the way with foreclosures and the real estate bubble burst are still in dire shape. That includes Florida, California, Arizona, and Nevada. California, Illinois, New York, and New Jersey are still battling massive deficits.

The real estate bubble still needs to deflate in some parts of the country and people aren't spending because they are worried that the other shoe is going to drop.

The stimulus package papered over those problems for one year, which means that the structural deficits remain in those cases and the lack of political will means that those states are not going to take meaningful action to close budget deficits and rein in spending as they must for long term stability.

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