For the past year or two it’s all been negative when we talk about the economy–stock markets were down, unemployment was rising, and more banks failing. We’ve sort of become numb to those things as they were commonplace, but lately the news has been a little different. Each week new reports come out that say manufacturing may be on the rise, some states are beginning to see an improvement in unemployment, and let’s not forget the 70% rally the markets have seen over the past year.
So, are these the green shoots we’ve been looking for, or are these just false signals that will ultimately lead to a double-dip recession? I’m no economist so I can’t really comment other than what I’ve heard on the news and seen first hand, but I can say that things are certainly better today than they were a year ago. Living in Michigan, the biggest problem we continue to face is the record unemployment and sagging real estate market. At least in manufacturing, I still know a lot of people are out of jobs. And when you look at the houses for sale around here, many have been on the market for two years now and still haven’t sold. So, I know we have a long way to come in this area, but I also realize we will be one of the last areas to recover. So, I feel that if the country as a whole is starting to gradually improve, we’re at least on the right track.
But what do you think? There are a lot of differing opinions out there still and I’m curious to hear your thoughts.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
@John: I couldn't disagree more. Most people failed to see this mess coming. If they had, they may have taken action to halt the inefficiencies and corruption taking place in the housing market. The Fed might have raised rates to slow the debt levels.
The business cycle is a natural event just like the seasons. Until we become totally rational creatures, it will be with us.
Things have improved from the lows, especially the stock market. However, this comes after the largest stimulus ever. In post WWII recessions, the average stimulus from the Fed and Treasury have been 2.9% of GDP. This recession the stimulus was 29% or ten times as much. This provides a jolt, but when the effects wear off we will probably see a reversion.
We are in a debt deflation. The only other instances of this are Japan in the 90s and US/world in the 30s. It will take a few years to get through this.
To be honest, I think it's too early to say just yet if the economy is really recovering. Maybe in a few months time we will be able to see more positive signs of improvement.
Recessions are mostly just self-fulfilling prophecies. Financial analysts started saying we were headed into a recession so people started to act like we had a recession. Same thing once people started saying we were on the rebound.
I'd have to agree with Abigail on this one. There are things that are looking up and areas that just aren't recovering as fast as we'd hoped but I'm sure we'll continue on a downward spiral for awhile. I have a feeling that our nation hasn't even hit rock bottom yet..
Hmmmm, I have a guest post this coming Monday somewhat about this topic. So, without restating my whole case, I think the answer is both yes and no. That is, the economy is (slowly) recovering. But a lot of the signs that economists/stock folks are heralding -- like increased spending -- are false positives and are caused by other things entirely.
Spring may just be around the corner in so many ways. While the debate rages on if we are in a recovery or teh second-coming-doom, there are so many ways to seek the high ground. Be conscious of your investment portfolio mix and adjust when necessary, be sure to invest in accordance with your risk tolerence, and keep your eyes open. Knowledge is power- although you can't see into the future, don't take undue risks and chances...and avoid those "hot tips."