Despite popular belief, research finds the US is not in double dip recession
An expected decline in housing prices notwithstanding, academics are now arguing that the U.S. economy is not seeing another downturn, although that is the way it feels since recovery is so slow. Official reports from the National Bureau of Economic Research, will likely soon say the Great Recession began in December 2007 and ended in June 2009 — the longest downturn since the Great Depression. As of the last meeting in April 2010, the NBER found that although most economic indicators turned up, the determination of the trough date on the basis of current data would be premature. "Many indicators are quite preliminary at this time and will be revised in coming months," the NBER concluded. During the latest recession, the U.S. shed 4.1% of gross domestic product from peak to trough. The unemployment rate more than doubled, rising to 10.% in October from 5% in December 2007, according to statistics from the Federal Reserve Bank of Cleveland. "Now that we are a year into the recovery, and the annual July benchmark revisions to the national income and product accounts are complete, the time is ripe for an assessment of the recovery so far," said Kenneth Beauchemin, a senior research economist from the Cleveland Fed. "Popular opinion strongly suggests that it has been 'substandard.' But what is the standard by which the strength of a recovery can be measured? Some point to a historical tendency for deep recessions to be followed by rapid recoveries and vice versa." In a research note, Beauchemin provides the following chart showing how weak the current recovery is compared to past economic downturns: "I have looked at the recovery from 30,000 feet," he said. "From that height, with some inevitable slippage and nuance, the recovery looks consistent with past recoveries—at least so far. Closer to the ground, recoveries will all look very different, with harder-hit sectors taking longer to recover or becoming permanently smaller. Credit will be tighter for longer in some sectors than in others." According to the Fort Worth-based First Command Financial Behaviors Index, through the second quarter of 2010 the employment situation in the U.S. left more than half of the 9,500 middle-class respondents with the feeling that the country is moving into a double-dip recession. Three-fifths of study participants are in a period of austerity and still looking for more ways to save, according to the index. "Given the belief that market instability could be with us for an extended period of time, those families who think we are currently in a double-dip recession are redoubling their efforts to embrace frugal living," Scott Spiker, chief executive of First Command, told the Dallas Business Journal. "These consumers are also more likely to cut spending than those who do not think we are sliding back into recession." Read First Command's report here. According to the latest economic report from accounting firm Deloitte, the economic picture may be brightening. The company cites surveys that find after a lengthy three-and-a-half-year period banks are tightening their loan standards to small firms. And senior loan officers said lending eased in the third quarter. "[Lending] standards for large firms have been easing since the start of this year," the report finds. "Loan standards for consumer credit cards also loosened in the third quarter, for the first time in two years. In addition, mortgage standards have also eased. Thus, spending by businesses and consumers could move out from the dark side in the coming months as loan access improves." Write to Jacob Gaffney.