I’m a few days late with this, but much of the mainstream media have covered it already. The recession is over. Officially. We are now in recovery officially. Actually we’ve been in recovery for over a year now, ever since June 2009. The official pronouncement is here. Of course this has led to much confusion and contention. Many people, rightly feeling the pain of nearly 10% unemployment, slow sales, foreclosures, weakening incomes, etc. are wondering “In whose universe is the recession over? I’m still hurting!”
What this all points out, though, is confusion over terms. Or, more precisely, the lack of vocabulary among economists. First, the whole reason for dating recessions “officially” is so that economic research amongst different economists can go on without endless confusion and arguments about the timing of some historical decline in GDP. In this case, the practice of “officially dating recessions” might well be a bust. It’s hard to tell. But in the larger public discussion, the current confusion of “how can the recession be over if I still don’t have my job back and it still looks grim?” actually reveals two serious flaws in economic theory/terminology.
First is the fact that economists have not defined the term recovery adequately. Basically, there’s a definition for recession, but not for recovery. Instead, a recovery is happening anytime a recession isn’t happening. So, since the period since June 2009 doesn’t really seem to fit the definition of recession (no broad-based decline in aggregate measures of the economy such as output, employment, and production), we are therefore, by default, declared to be recovering. Except of course that we aren’t really recovering. We’re going nowhere. In aggregate we stopped declining in summer 2009, but we haven’t started really growing in a broad-based way. We certainly haven’t come anywhere near re-couping what we lost. And that brings us to the second terminological problem. Economists and theory are based on the assumption that an economy is either growing significantly or declining significantly. We have “recovery” for when we’re growing, getting better, and moving upward. We have “recession” for when things are declining, getting worse, and moving down. We don’t have a word, indeed we barely have a concept, for an economy that’s parked. Stationary. Going nowhere. That’s why we’re speechless. The economy has fallen and it can’t get up. But we don’t know how to say that.
BTW: Want to know the official dates of previous recessions? Check it out here.