The business press exploded with joy at the new GDP numbers hinting that the recession may be over. Last quarter was the first time that GDP had increased in a year. Most economists treat this as a signal that an economic recovery is underway.
Recessions and recoveries are a lot like the flu. Staying in bed with a fever and chills is a recession: It is terrible, but it does not last that long. Getting out of bed, you still bad for a week with a cough you can’t seem to shake. That is recovery.
The U.S. economy suffered a bad case of flu. Even though things are beginning to feel better, the economy is still sick.
- Approximately 7.2 million fewer people are working today than when employment peaked at the end of 2007.
- As the figure above shows, even with the uptick in output, U.S. GDP is at the same level it was three years ago.
- Business have cut employment and are returning to profitability. They have learned to earn profits with fewer people and cheaper inputs. This is good news for the stock market, but bad news for employment prospects.
- Federal “stimulus” spending reached its maximum effect in past quarter, yet the unemployment rate remains high, injecting some uncertainty into whether the recovery can sustain.