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Recession’s Over- Feel Better Now?

September 21, 2010 1 comment

They’re called the National Bureau of Economic Research and somewhere along the line they got anointed the official declarers of when the American economy has entered into and exited recessions. You’ll be happy to know they are reporting the recession ended in June of last year.

Particularly sensitive to their suspicions the larger American public would issue one concerted and unified sarcastic laugh at their technical analysis, the NBER has taken pains to point out that recovery has been very slow. They add unemployment, currently at 9.7%, is always a lagging indicator.

And I will take pains to point out, that generally, the NBER is a lagging analytical organization. They usually make their declarations about a year after the fact. These academic economists are now concerned we’re headed for a double-dip recession, which considering how long they lag, we could be in it right now.

So what does all this mean for the 25+ million Americans who are out of work? This figure includes the additional 8% or so who have given up looking for work, don’t get counted in jobless statistics but are still unemployed. It means nothing. Much like the “official” jobless figures mean nothing by understating the real number of people out of work. That very month the recession “officially” ended, June of 2009, the Bureau of Labor Statistics reported that 550,000 Americans lost their jobs.

See, the NBER doesn’t really look at the jobless figures to determine the end of the recession. They base their analysis on the GDP, the Gross Domestic Product. This is the sum of all economic activity within the nation’s borders. There are three basic formulas for calculating GDP and one of them, for example, looks like this:

GDP= C+ Inv+ G+ (eX-i)

“C” stands for private consumption (what we spend on stuff). “Inv” stands for gross investments (what we spend not expecting an immediate return, like a company buying new machines to make widgets cheaper). “G” stands for government spending. “(eX-i)” is exports minus imports, a way of ferreting out what we made within our borders and what arrived here from outside our borders.

So there you go. In June of 2009, the formula said we got into positive territory and the economy stopped contracting.

With all due respect to economic analysts and the academic community that makes its livelihood debating these theoretical points, here’s another formula:

GDP+(RJN-OJF)+NBER= BS

GDP we’ve explained. RJN is Real Jobless Numbers from which we subtract the OJF, the monthly Official Jobless Figures. NBER is the 8 academic economists whose work made headlines today. BS is a universally acknowledged acronym that means exactly what you think it does.

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