9/28/2010

Is the Recession Over?

The longest recession since the 1930's officially ended in June 2009. Lasting 18 months, this "great recession," as it has been called, has caused the loss of an estimated 8 million jobs. Although technically over, many are asking whether the effects of the recession are really over, or if this is just a temporary state for the economy. According to the LA Times, "Mark Zandi, chief economist at Moody's Analytics, said it was noteworthy that the panel settled on June, as it was during that month that the spending from the Recovery Act stimulus was at its maximum."
In order for the recovery to continue, it seems as though an additional stimulus package will need to be passed by the government.
And, while Warren Buffet is stating that there will not be a double dip recession, more economists are stating that the risk of a double dip recession is increasing.
In my opinion, this recovery is fragile at best. I believe there are more dips ahead for the economy. If allowed to recover at a natural pace, the cycle of the economy will eventually recover to a bullish economy (as Warren Buffet states). This current recession occurred due to economic and political policies which staved off the inevitable and natural downturn in the economy. In order for future "great recessions" to be avoided, reasonable policies need to be in place to allow the natural, smaller recessions to occur.

- Ralphie

1 comment:

Dave said...

A good post ... on topic for managers, but a little off topic for a Managerial Economics class. I have 4 additions or clarifications.

1) Mark Zandi was not regarded as partisan until recently. No economist would ever seriously claim that stimulus acts without a delay. For Zandi to claim that this coincidence is meaningful is unethical.

2) Ralphie asserts that more stimulus may be needed. As a macroeconomist, it's hard to see that the government knows how to do anything other than stimulate. Many of the explanations of the financial crisis involve over-stimulation on the part of the government leading to problems.

3) Yes, opinions are that the probability of a double dip has gone up ... but they're still not very high.

4) Ralphie asserts that "there are more dips ahead". This is probably not the case. The peaks and troughs that separate expansions and contractions can be hard to predict, but the expansions and contractions themselves are fairly distinct: more like an airplane taking off and landing than a balloon that might bounce a few times.