A month ago we took stock of the economy, noted some welcome positive news, observed the crosscurrents that were still threatening us, and advised watching some key areas (economists’ estimates, homes sales, jobs, the WTO-China conflict, consumer spending, stimulus money) as we focused on the future.
Things are a notch better in the ensuing month as a broad economic recovery seems to be creeping along, and while we aren’t in favor of irrational exuberance, we are in favor of a clear-eyed assessment of the facts.
So how are we doing so far? Is the worst recession in 70 years over?
The answer is yes it is! A growth rate of 3.5% in GDP for the third quarter signaled the end of the recession. Remember, a recession is defined simply as two quarters in a row of negative GDP growth.
Having said that, it is important to recognize that many people who saw the value in their investments, retirement and college funds and equities drop in value are still suffering from the effects of the recession. Likewise for the many people who lost jobs or contracts, whose hours were slashed or whose benefits were chipped away in company cost-cutting moves. The loss of 6.5 million jobs since December 2007 has spurred the sharpest rise in the unemployment rate since the 1930s, and it is expected to rise above 10%. We are not surprised, as we predicted this rate some months ago.
But there have been a few indicators that tell us the recession is indeed over. Home sales have risen for a few straight months, the stock market has rallied since March, the economy is expanding, and Federal Reserve chairman Ben Bernanke told Congress economic activity “will increase slightly over the remainder of 2009.” Continue Reading…