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Is the Economy Recovering?

Written by Nickel - 22 Comments

Last summer I ran a poll asking whether or not you were feeling any economic pain. At the time, 51% answered “yes” with an additional 16% saying saying that you weren’t, but that you suspected it was just around the corner.

Since that time, the stock market has rebounded nicely, though it’s been a pretty rough ride over the past six weeks, and we’re still nowhere near pre-crash levels). At the same time, the Federal Reserve is reporting that all parts of the country are showing signs of economic growth.

At the same time, unemployment rates are still very high, and European economies have started sputtering. With these things in mind, today’s poll focuses on whether or not you guys think things are really getting better…

Is an economic recovery underway?
View Results

As always, please also feel free to chime in with a comment to add some context to or otherwise clarify your answer.

Note: If you’re reading this in the RSS feed, you might have to click through to participate and/or view the results.

Published on June 11th, 2010 - 22 Comments
Filed under: Economy, Polls

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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22 Responses to “Is the Economy Recovering?”

  1. 1
    MoneyEnergy Says:

    I think I agree with the decoupling theories. Certain countries have been able to pull out of this much sooner than others. And it’s not clear that there won’t be a double dip in UK and in the US when stimulus runs out.

  2. 2
    Caro Says:

    I almost wanted to say “other” because while I believe the economy is improving, I also believe that it will be a much slower improvement than anyone expected or wanted.

  3. 3
    Layaway Report Says:

    Improving? You have got to be kidding! We as a country owe more than we ever have before and that means our country will feel the same impact as the real estate implosion. You just can’t keep printing money and figure you won’t have to pay it off. It simply doesn’t work that way. What improvements you have seen are delayed reports of “economic stimulus”.
    Tread Lightly.

  4. 4
    Ace @ aceofwealth.com Says:

    Cool post Nickel, I can’t wait to see the final results.

  5. 5
    Steph Says:

    My job is laying off somewhere between 100-200 people this year and maybe more next year. (I work for a fortune 200 based in CA). Also, the housing market in CA is still crumbling. So I would say in CA we are still declining more than ever.

  6. 6
    DIY Investor Says:

    The economy is improving in terms of GDP and very slowly in terms of job creation. The problem now is that people are not spending like they have in the past and we are moving more and more towards socialism. The BP problem will just speed up the process. One day we’ll wake up and find the means of production are owned and run by the government. Then we’ll be like Venezuela and other countries.

  7. 7
    daenyll Says:

    I think we are seeing recovery, but it’s likely to be very slow and dicey. But hopefully some fiscal responsability will get taken away from the last few years events for all sectors. And saving rates will continue to inch higher, and debt spending lower.

  8. 8
    Olivia Says:

    Overall there is no improvement. The stock market is responding to people’s perceptions, not reality.

    There are 200 houses still on the market in our small town. Five years ago they’d be gobbled up in a week or so as we’re near a large city. Now they languish.

    Government pumping money into the economy is short sighted and ineffective. We live in interesting times.

  9. 9
    MITBeta Says:

    I voted “other”. I’m simply not sure.

  10. 10
    Hickepedia Says:

    No improvement to getting worse. From getting laid off last year to now losing my contracting gig that was sort-of-but-not-quite paying the bills this year…there can be no meaningful improvement without jobs.

    And those jobs continue to flit overseas, never to return, no matter how much you and I detest talking to “Bob” in Bangalore or “Mary” in Malaysia.

  11. 11
    kseahag Says:

    It certainly isn’t getting better at my house. After 23 years my company closed. Those of us that worked at the company and have found new employment are making close to half of what we were making. New York state just can’t seem to get their politics in order, I hope it’s better when Paterson isn’t governor anymore, but I doubt it.

  12. 12
    Jason Deegan Says:

    There is no recovery with deficit spending. None. Even if you *think* it’s recovering, we’re only delaying the inevitable.

  13. 13
    Aaron Says:

    Jason Deegan & Layaway Report -

    We’ve had deficit spending for most of our history since WWII. Since 1940, there has only been 12 years we’ve run a surplus. Yet amazingly, our economy has been indisputably more prosperous in that time than any other time.

    There won’t be any economic recovery while there’s deficit spending? Historical data shows quite the opposite. The economy rebounded from many hard times while the government was running deficits. WWII spurned massive deficit spending that ended the Great Depression. The recession in the late 70’s/early 80’s ended during a surge of government spending. The recession following the first Persian Gulf War ended during periods of deficit spending. The recession following 9/11 ended during a period of deficit spending.

    Deficits are not inherently evil. I’m not suggesting that large deficits are always good. However, declaring the US economy will continue to be weak simply because of current deficits is outright wrong, as basic historical fact above illustrates. In fact, deficit spending is a tactic that can be used to end recessions, which raises tax revenues, which can allow surpluses. See 1947-1949, and 1998-2001.

  14. 14
    David C Says:

    @ Aaron
    Right, what really matters is how much we must pay to service the debt and whether those payments force us to cut back on other necessary expenditures. It will only become possible with time to determine if our debt payments become too large to handle: I believe it is reasonable to worry that our mandatory spending (Medicare in particular) will rise too fast to make this time around different. I would certainly brace for a non-trivial dose of inflation to cut the (real) debt down.

    I really wish you had not brought up 1998-2001, though: I don’t think holding up a bubble as a means to increase GDP and tax revenue is a strategy we should pursue.

  15. 15
    Aaron Says:

    Hey David C,

    Thanks for the comments.

    I brought up 1998-2001 simply to illustrate the point, not to endorse specific policies in specific time periods. I was only showing that ideally deficit spending can and should be followed by periods of surpluses to pay down the national debt, and it has happened. Admittedly, it hasn’t happened enough.

    I see a lot of reactionary comments on blogs, forums, and just on the street about how horrible our current deficits are, and how it will undoubtedly ruin the US economy, but such comments lack historical perspective. Blanket insistence of a balanced budget is a simple solution to a complex problem, and far too often, as is in this case, simple solutions either don’t fix complex problems, or create new ones that are worse. The reality is with the economy in its current state, we have to deficit spend to a scale that we’ve never done before in raw dollars.

  16. 16
    Carma Says:

    I have a temporary job with the 2010 US Census. There were 2/3 of a million of us. There are five phases to this and layoffs in between phases. I was just wondering if those jobs were counting as new jobs when it showed employment improvement – those numbers could really add up. The Federal Government knows about this large temporary workforce, so I am sure the numbers are being considered in the statistics somehow because it should not be considered as growth.

  17. 17
    Carma Says:

    This poll makes “Yes” look better than it really is. There are two “No” choices. I’m just noting.

  18. 18
    Nickel Says:

    Carma: Just add the two “No” categories together. Currently 175 “No” (total) to 109 “Yes.”

  19. 19
    Jason Deegan Says:

    Aaron,

    Your post reminds me of the story of the man who jumped off the 40-story building and was heard as he passed each floor, “see: everything is just fine.”

    Your post is theoretical economics 101, and is essentially correct. I think our difference is, you will use a liberal definition of “improve,” (I’ll use an exaggerated example to illustrate: if GDP (and whatever other factors you choose to use to formulate your opinion) goes down 20% every quarter for the next 20 years, but goes up 1% in one quarter, that means it’s “improving”) and I choose to interpret “improve” as “sustainable improvement.”

    There is no sustainable improvement with current deficit and current spending levels. A liberal fiscal policy (perpetrated by both parties, so I’m not advocating ‘Vote Republican’) is gonna’ cause a large splat!

    The only reason we’ve lasted as long as we have is because how important we’d become in the world. Money is amazing, no matter your race, creed or nationality it treats everyone the same. And when you spend more of it than you have over a long period of time, you splat.

  20. 20
    Aaron Says:

    Jason Deegan,

    As I pointed out, we’ve run deficits the last 70 years except for a handlful of occassions. During that time, the deficit obviously has grown tremendously. This country has been faced with running unprecendented deficits before, chose to do it, and came out the better for it. See the Great Depression and the 1980’s.

    This isn’t theoretical economics. You’re suggesting that GDP has gone down 20% every quarter since 1940 or 1982, but occassionally goes up 1% a quarter; that’s historically false. If you’re suggesting the US economy hasn’t improved since 1920 or 1982 overall, you’re ignoring historical fact.

    I’m not suggesting the government has an endless pit of money and can run up any deficit it wants and be okay. The US government has not run a sound fiscal policy overall in the last decade. The real problem is not the current deficits; it was the record deficits run during a massive surge in government spending during a period of record economic growth in the 2000’s. Those deficits in fact helped to fuel the bubble to make the crash much much worse. Once the economy tanked, we had no choice but to deficit spend at a record level considering the severity of the recession.

    This isn’t about conservative vs. liberal. When push comes to shove, political conservatives and liberals have no problem with deficit spending so long as the money is spent on what is politically important to them. It is about what we know from historical record.

    I can understand concerns that the deficit is too big. What I cannot understand are blanket statements that deficits are always bad, or there won’t be any sustainable recovery as long as there are deficits. It’s quite the opposite – there won’t be any recovery without deficits. The question is how much is necessary, and once recovery is underway, how do we pay down the debt in a way that promotes sustained growth.

  21. 21
    Paul Says:

    The improvement is just an illusion. Someday we will be speaking Mandarin when the deficits come due.

  22. 22
    Kirk Kinder Says:

    @Aaron: Your stats are correct, but you are falling prey to the same Keynesian argument that Bernanke and others running our government believe.

    A person, corporation, or government can increase debt loads for years without any real effect. Temporarily, debt can actually seem to boost wealth. Our debt levels have increased well beyond income and GDP levels since the mid-1980s. However, just as a consumer eventually faces default or the inability to repay the debt, a country can face that as well.

    Keynesian economists believe that a key to a strong economy is to keep aggregate demand growing, which is another way to say consumption or economic activity. It doesn’t matter if it is through debt or savings. The economy cannot shrink. Austrian economists argue that only through savings and investment can economies truly grow. If debt is used to increase GDP or asset prices, eventually this will implode as asset prices decline faster than the ability to repay the debt.

    We are hitting that point now. We hit this in 1929 as well as did Japan in 1989. Austrian economists call it a Minsky moment, named after Hyman Minsky, a noted Austrian economist. He talks about getting to a point where the previous trend no longer holds, such as GDP growth through debt, and a collapse follows.

    The current uptrend in the economy is a last gasp by the government to keep it going. We are experiencing anemic GDP growth figures compared to historically equivalent downturns. Usually, downturns as big as what we experienced in 2008 are met with growth of 7 or 8% in GDP. Yet, the government, through monetary and fiscal policies, stimulated the economy ten times more than a normal recession. Once this wears off, the economy will falter due to debt deflation. The government seems to be following the Japanese playbook of endless rounds of government stimulus. Yet, the Japanese stock market is 75% below its peak and real estate sells for 1970s prices.

    It is going to be a tough row to hoe.

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