Economists Say “Recession Is Over”?
Comments (2)You may have heard the news that economists are declaring that “the recession is over”. Hmm … doesn’t feel like it, does it?
Technically, meaning in the economists’ definition, a recession is a least two consecutive quarters of decline in real Gross Domestic Product (GDP). This is also known as “negative growth”, although an increase is never called “positive shrinkage”, but that’s another story. Thereafter, as soon as a quarter comes along with GDP growth at or above 0%, the recession is declared to be over. In Canada, that happened in the third quarter of 2009, when GDP growth was 0.3%. That’s not a whole lot, but it’s a positive number nevertheless.
The trouble here is that real GDP growth in Canada over the last 10 years averaged about 3.1%. The Q3 2009 gain of a mere 0.3% is positive, but still way below average. If you’re used to 3.1%, 0.3% just doesn’t cut it.
What’s worse is that it’s difficult to see when things will get back to normal, namely, something like the good old average that we’re used to. For one thing, all those government economic stimulus and bailout programs won’t be around in 2010. Governments have also run up big deficits because of those programs, which taxpayers will eventually have to pay for. Plus, unemployment remains high, so there’s fewer income earners to foot the bill.
So here’s a proposition for economists. Instead of saying “the recession is over” when GDP just limps into positive territory, change the decision point to when GDP growth returns to the 10 year average, or even gets within 50% of the 10 year average for that matter. This is a much more realistic way of describing what’s going on. It would be good for your PR, especially after having so utterly missed calling the recession in the first place.
