So here we are, in the midst of a recovery. Remind me: How is this different from a recession?
Oh, right: Some things are getting worse more slowly than they used to, and other things have gotten so bad that they can't possibly get any worse. And a few things are actually getting better. When economists add it all up, they're tallying the first net gain in more than a year.
On the plus side, corporate profits have picked up and business executives are more optimistic. All that stimulus spending and those aggressive maneuvers by the Federal Reserve are kicking in. So are all the layoffs—in a good way: With fewer workers, companies have enjoyed a surge in productivity. Moody's Economy.com believes the recession that officially started in December 2007 officially ended in August 2009. Hooray! It's over!
Except that an awful lot is still going wrong. Even if the economy is growing again, the number of jobs isn't, and most economists expect the unemployment rate, now 9.7 percent, to keep rising until the middle of 2010. So we're having a "jobless" recovery. Home sales have picked up, but prices are still falling and foreclosures keep hitting new records. So we're also having a homeless recovery. The commercial real estate market has only begun to collapse. Bad loans on real estate and consumer purchases could bring down another 400 banks before the financial meltdown is over. Anybody who wants to start or expand a business is more likely to get swine flu than a loan.
We're having a jobless, homeless, loanless, and maybe a recoveryless recovery. This is the kind of recovery that makes you wish you were still in the downward-spiral phase, like the first moment when you open your eyes after a wild, boozy night.
Maybe the recovery will start to feel better the longer it lasts. But it could also be an endless recovery that never quite brings a return to prosperity. American consumers are out of money, and they have little choice but to save their disposable income in order to replace all the wealth they've lost in the housing bust and stock market crash. Consumer spending accounts for two thirds of the economy, so even a minor decline can wreck the economy if it persists. And one entrenched problem feeds others. With so many people out of work, raises will be scarce, incomes flat, and consumer spending weak. Economist Gary Shilling says that for a net gain in jobs, the economy has to grow by at least 3.3 percent per year. But most economists predict much lower growth for 2010, and some think weak growth will last much longer than that. If it does, who's going to spend the money that forces the economy out of rehab?
Oh, yeah, I forgot: The government's going to spend the money. With private construction dead and consumers broke, stimulus projects, unemployment benefits, and rebates on cars and homes are going to sustain a vibrant new welfare economy. Until the government itself runs out of money—which, technically speaking, has already happened. (Cliché alert: Instead of looking for "green shoots," economists are now anticipating the moment when "the training wheels come off" and the economy moves forward without government stabilizers.)
The good news is that most Americans probably know that a recovery doesn't start when economists or politicians (or the media) say so. It starts when local companies start hiring again, when it's possible to get a raise, and when take-home pay covers the bills with something left over. In much of the country, that hasn't happened yet. When it does, tell the economists that the real recovery has begun.