Benjamin Disraeli, the 19th century British Prime Minister, once said that there were three types of lies: lies, damned lies, and statistics. Never have those words been truer than now, as I read and listen to the debate about the state of our current recession.
According to Ben Bernanke, chairman of the Federal Reserve, the “recession is very likely over”. And, if you look at the technical definition of recession, which is “two consecutive quarters of falling gross national product”, he is very probably right. The overall economy has stopped shrinking, and economic watchdogs are predicting moderate growth beginning in 2010 (which, by the way, is around the corner).
If you study the numbers closely enough, you can see the signs of recovery; consumer spending in August was much higher than in July, for example. Of course, no mention is made in these figures that August is traditionally when everyone shops for back-to-school items, and many states, our own included, held sales tax holidays this year. And, lest we forget, this August also contained two weeks of “Cash for Clunkers” that boosted activity in the auto industry’s showrooms, resulting in almost half a million new cars sold. But numbers are numbers – spending was higher in August than in July.
As a result of the increase in consumer spending, manufacturing, which had ground almost to a halt in the spring, is rebounding. Of course, inventories were already low before the August sales, and those incentives that lured buyers back into stores and showrooms depleted them further. I only need to look at my own search for a new car as proof. There I was, checkbook in hand, ready to take advantage of the good deals on offer, with nothing left to buy. So factories are revving up once again, albeit on a more modest scale. Manufacturers seem to have received the message that the U.S. consumer will buy if the deal is sweet enough, but may not, at least initially, be spending like the good ole days of 2006 or 2007.
Locally, the signs are promising. IBM has, at least for the moment, stopped slashing jobs, and is hiring again. True, these are only relatively short-term contracts, but they are jobs, and they come with benefits. And, if you’re not qualified for one of those positions, there is seasonal work available, whether it’s working in local stores during the Christmas season, or on the ski slopes for the winter.
And banks have begun lending again, although with zealous regard for the borrowers’ abilities to repay the loans granted. Nationally, one-third of all mortgage applications are being denied, either because the borrowers don’t earn enough to warrant the size of the monthly payment, because the house isn’t worth the amount the borrower wants to borrow, or because the borrower’s credit score is less-than-stellar.
The stock market roller coaster continues its upwards climb, and the number of claims for new jobless benefits is beginning to fall.
So, based on the statistical data, the recession is over, or very nearly so. All that’s now lacking is the marching band and the balloons.
But, to the huge numbers of the unemployed, the party may be premature. For many of them, unemployment seems no longer temporary, but rather a permanent state. The numbers bear this out: the number of people unemployed for 27 weeks or over between August 2008 and August 2009 has mushroomed from fewer than 2 million to almost 5 million – in the course of just one year. And these numbers don’t take into consideration the people who have stopped looking, or those who have accepted part-time work as a stopgap measure.
And, for those in danger of losing their homes, news of the economic recovery seems overhasty. Read the statistics from RealtyTrac.com one way, that the number of foreclosures in August was slightly down from July, and the news is good. Read another way, they increased over 18 percent from August 2008, which is bad news. A third set of numbers shows the scope of the problem: countrywide, one in every 357 U.S. housing units received a foreclosure filing in August. While not every foreclosure results in a family out on the streets, the fact that so many families are at risk remains alarming.
To the Ben Bernankes of the world, the end of the recession is governed by data that shows a definite uptick in the economy.
However, to those of us living through it, the end of the recession is more than just a matter of increased consumer spending and manufacturing jobs, and decreased numbers of new people on the unemployment rolls. For us, the recession will truly be over when we know that our jobs are secure, that the banks won’t sell our homes out from under us, and that we can put food on the table, run our cars and heat our homes.
If the data indicates that the recession is truly over, why then does it feel, to paraphrase Mr. Disraeli, that this is just so much statistical spin?