Why the End of Recession Doesn't Feel Like a Recovery

(Sept. 20) -- It's official: The recession ended in June of last year. The problem for the millions of Americans slammed by the worst economic trough since World War II is that it just doesn't feel that way.

The official judge of American economic cycles said today that after crunching years of data it finds the economy bottomed out halfway through 2009, marking the end of a recession that began in December 2007 amid a snowballing financial crisis and lasted significantly longer than any other downturn in recent memory.

But the National Bureau of Economic Research, the New York-based nonprofit, nonpartisan arbiter of recessions, noted that economic activity is typically slower than normal in the early stages of an expansion and sometimes well beyond that.

"In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity," the NBER's Business Cycle Dating Committee said. "Rather, the committee determined only that the recession ended and a recovery began in that month."

The 18-month decline in economic activity surpassed the eight-month contraction that followed the dot-com bust nearly a decade ago and the eight-month recession that kicked off the 1990s, as well as the 16-month recession in 1981 and 1982.

More than 8 million people lost their jobs, pushing a record number of Americans into poverty. And though the economy began to generate job creation at the outset of this year, the pace of hiring has barely started to make a difference for all the workers dropped from U.S. payrolls

The NBER added that the employment situation usually continues to suffer after the broader economy -- as measured by national levels of spending and earning -- begins to bounce back. In fact, it took 21 months after the 2001-03 recession for hiring to take off again, longer than the six-month lag that followed the recent downturn.

But therein lies a problem for both politicians and economists charged with nourishing U.S. prosperity and the legions of Americans still suffering: Is a mostly jobless recovery still a recovery?

"Obviously for the millions of people still out of work, people who have seen their home values decline, people struggling to pay their home bills every day, it's still very real for them," President Barack Obama said at a town hall meeting sponsored and aired by financial-news cable network CNBC. "The hole was so deep that a lot of people out there are still hurting."

"Is This My New Reality?"

Several participants -- who included Wall Street executives, small-business owners, teachers, students and the unemployed -- echoed the sentiments of one audience member, the chief financial officer of a veterans' rights group, who said she voted for Obama but has lost patience with his policies.

"My husband and I have joked for years that we thought we were well beyond the hot dogs and beans era of our lives," she told Obama. "But quite frankly, it's starting to knock on our door and ring true that that might be where we're headed again.

"Mr. President, I need you to answer this honestly: Is this my new reality?"

Obama said he understood her frustration, and then recounted the litany of programs his administration has pushed through to turn the economy around and then help the middle class: more money for student loans, new protections for credit card users and struggling homeowners, tax breaks and hiring incentives for small businesses -- essentially a set list for the defense of his record that the president has increasingly offered this midterm election season.

"But the bottom line is, if your 401(k) is still down substantially from where it was a while back, if you haven't seen a raise in a long time, if your home value went down, depending on where you live -- you know, all those things still make you feel like, 'Gosh, I'm treading water,'" Obama said. "And so my goal here is not to try to convince you that everything's where it needs to be. It's not. ... But what I am saying is, is that we're moving in the right direction."

Iffy Outlook for Employment

That was essentially the view expressed today by the Organization for Economic Cooperation and Development, the Paris-based think tank shared by the U.S. and the world's other major industrial economies.

The OECD said that following one of the most severe crises since the Great Depression, the U.S. economy is expanding at a pace that could reach 2.6 percent this year, and that employment has started to rise but the unemployment rate is likely to stay above pre-crisis levels for some time to come.

"It is becoming increasingly clear that the economy has entered a soft patch," OECD Secretary-General Angel Gurria said in New York ahead of the annual United Nations summit. "We don't see a risk of a double-dip recession. That said, we don't see either a recovery that is strong enough to put a significant dent in unemployment."

The OECD called for the U.S. to expand and prolong new training and education programs for the unemployed to help them adapt to the post-recession economy and confront the epidemic of long-term joblessness. And Gurria said economic support from the government, including efforts by the Federal Reserve to spur lending, are still necessary.

"It Doesn't Matter If I Was Green"

Fed policymakers are scheduled to meet Tuesday. But with interest rates and the cost of borrowed cash already at historic lows amid steady if slowing signs of a recovery, there are disagreements within the U.S. central bank over how or whether to act. Tepid and relatively jobless growth just aren't as clear an economic illness to diagnose as recession or rampant inflation.

Nor is it an easy issue for Obama or other politicians to explain to voters amid the current environment of scorching political rhetoric -- a phenomenon akin to the bitter, often personalized debates during past economic downturns in American history.

Obama was asked by CNBC moderator John Harwood if he thinks "it's possible that because of your style or the unusual things about your background -- your racial heritage, where you grew up, Ivy League education -- that the fearful voters who are about to go to the polls in November think, 'Yes, I hear him. He may get it intellectually, but he doesn't feel what I'm feeling?'"

"I think that when the unemployment rate is still high and people are having a tough time, it doesn't matter if I was green, it doesn't matter if I was purple. I think people would still be frustrated, and understandably so," the president replied. "If you're out of work right now, the only thing that you're going to be hearing is, 'When do I get a job?'"