The National Bureau of Economic Research declared last week that the recession officially ended in June 2009. But according to a new poll from CNN/Opinion Research Corporation, Americans overwhelmingly disagree.
Nearly three-fourths of Americans — 74 percent — say the economy is still in a recession. That’s a slight improvement from December, when 84 percent of those polled said they believed the economy was in a a recession, but it still discouraging.
Source: CNN/Opinion Research Corporation. Latest survey conducted September 21-23, 2010, with 1,010 adult Americans questioned by telephone. The survey’s overall sampling error is plus or minus three percentage points.
So what’s the deal? How can economists be so out of touch with the suffering of “regular” people? Or how can non-economists be so ignorant about what’s really going on in the world around them?
One possible reason for the disconnect between popular views and the official economists’ view of the country’s “recession” status is semantic.
Economists and laypeople mean different things when they use the word “recession”: To most people, it refers to the level of economic activity. To economists, it refers to the change in economic activity.
That is, most people associate a poor economy — that is, low levels of spending, high levels of unemployment — with the word “recession.” They use the word to refer to times when the country just feels lousy.
But economists use the term “recession” to talk about the economy’s direction. Regardless of whether the level of economic activity is good or poor, is the economy shrinking, or is it growing? The National Bureau of Economic Research says that the economy stopped shrinking in June 2009. Then it started growing again, even though the pitifully slow pace of growth still meant the level of economic activity was horribly depressed.
Here’s a look at absolute levels of gross domestic product to give you a sense of what I’m talking about. Output has been rising for the last year, but absolute levels of economic activity are still low relative to their levels before the recession had begun:
Bureau of Economic Analysis, via Haver
The economists at the agency’s Business Cycle Dating Committee took pains to make this clarification, writing: “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.”
So when non-economists and economists disagree about the label for current economic conditions, they may just be talking past each other.
Addendum: There is also debate within the economics community about whether it makes sense to change the criteria for determining when the economy is shrinking, because in the last three recoveries output has reversed course much earlier than the job market has. But that is a separate issue.
Comments
Post a Comment