This morning, several news sources reported that economists have final declared the end date of the recession – June, 2009. You may be thinking – huh? It’s simple – the formal definition of recession is defined as a certain period of negative growth. When that ends, the recession ends, even if your personal situation doesn’t greatly improve.
This was the longest recession since WWII, lasting from December, 2007 to June, 2009. So, we can safely say that it did start during George Bush’s presidency, and Obama’s economic stimulus really didn’t do much to end it, because his economic stimulus plan wasn’t fully rolling before it ended.
Now that we’ve gotten the politics out of the way, let’s dive into what it means for you.
You Can Feel a Difference
For many people, the end is starting to feel more real, but only now, not a year ago. As late as last Christmas, I had a friend who asked her parents for grocery store gift cards and borrowed money from them to buy her children a couple of gifts. Now she has a job. As she said, they’ve gone from “we can’t pay the bills” to “we can’t pay the bills right now, but we can soon.”
Not much has changed for my husband and I, but my company did finally give raises earlier this year, so at least there’s been some progress.
Unemployment Is Still High
Many people wonder why unemployment is still high when the recession is over. Remember, unemployment is a lagging indicator. In the last recession, employment didn’t recover until 19 months after the end. So, we have at least another four months until we expect to see recovery. However, this recession was longer and deeper, so I think it will be longer. There are a couple of reasons why high unemployment lasts so much longer:
1. Unemployment only counts people looking for jobs. If you give up, you stop being counted. Many people gave up last year, and then returned to the job market this year, which caused the rate to actually go up despite an improving job market.
2. Employers don’t instantly start hiring when demand for their product increases. Instead they push their current employees harder and only hire when they’ve maxed our productivity. That can take a while.
Spending Won’t Reach Its Former Heights – For Now
Families won’t be able to use their homes like ATMs for a long time. I’m sure we’ll get there, but it will be at least ten years before banks become that reckless again. I also think that this recession has shaken the American consumer deeply. The current generation will remember the pain and be more careful with their spending. I’m not saying we won’t buy fancy phones, cars, and TVs. We will. But we may also be more careful with those purchases and save more money toward them. We may also decide to forgo other purchases.
Here’s an example: I’ve been thinking of buying an artificial Christmas tree. I wanted to buy it this year, but we’re buying a new TV/TV stand this year. A tree will cost around $600-$700, so I may put that off until next year. We can go another year without one. We’ve already done it for six years.
The Housing Market Will Still Suffer
The housing market is going to continue to suffer for a while. Although prices have stabilized or improved in some places, the end of the home buyer tax credit deflated demand. Most people who could afford to get into a home already did. Those that are left are biding their time or bidding lower. On top of that, there are still many more homes that have already been foreclosed, but not yet marketed, or that are waiting to be foreclosed. So, I don’t expect to see the housing market fully recover for at least seven years. If you don’t have to sell right now, don’t.
Even though economists say the recession is officially over, in fact they say a double-dip is unlikely, only you can decide if your personal recession is over. That’s what really matters.