Recession Is Over, Thanks to Stimulus
The economy grew 3.5% in the third quarter this year, the first time it has been positive since the recession started in 2007. Recessions are usually defined by negative GDP growth. The BEA report means the recession is technically over.
However, much of the growth was driven by the Economic Stimulus Program and the Cash for Clunkers incentive. Government spending contributed 2.3% to GDP growth, while motor vehicle sales contributed 1.66%. Without the spending, GDP would have still been negative. With a Federal debt level hovering around $12 trillion, how long can government spending drive the economy?
For a history of all GDP reports since 2007, see GDP Current Statistics. (Source: GDP News Release)
What It Means to You
There are many economic trends that could delay a full recovery. The commercial real estate time bomb is still ticking and a "shadow inventory" of foreclosures is hanging over a housing recovery. Businesses are still not confident, which means unemployment will continue to rise. This will hamper consumer spending, which drives 70% of economic growth. Most important, normal bank lending needs to return for a full recovery.
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(Photo Credit:Bill Pugliano/Getty Images)
Comments
So…why title your article recession is over?
Hi Kimberly
Hi da
Well, technically it is! It may not feel that way for a while, though. Plus, we could have a snap-back. That’s why it is important to be flexible and have multiple streams of income.
Nice to hear from you. Hope you are doing great!
Kimberly
Have you been drinking? Maybe in your eyes because the recession has never happened for those who still have jobs. Log in to https://usvoices.webs.com and see how dangerous your thinking is because it gives people like you reason to ignore some of the real issues that real people are having. Read them and honestly tell me that they have nothing to worry about!! Suicides, depression, hunger, bills, rent and no hopes of tomorrow. If the recession is over what is going to be done for the personal depression these people have gone through. These people feel as if they are being punished and there are millions who are living in fear. How many heart attacks, strokes and nervous collapses must be had before people like you stop manipulating numbers to ease your own minds and look at real facts. Get out from under that rock, or get your head out of those clouds and take a real look at people who will have nothing to celebrate or be thankful for in these upcoming holidays. I want to work!!! But how do I do that when I do not have the money to seek employment? I have been reduced to shoplifting in order to put food on the table for my family and it does nothing for my dignity to admit it. But I’d rather give up my dignity and whatever self respect I have left than see my family starve. Right now we cannot eat Health Reform, and it does not keep us warm or protect us from the elements. Stories about how great the economy is doing instead of putting a face on the suffering only crates more ignorance. We had jobs and have no idea how to maneuver through a welfare system that does all it can to discourage rather than assist. We had a glimmer of hope in HR 3548 but does that matter to you? The real facts lie within those who are feeling and reeling from this experience everyday. We are told to be patient but patience is a luxury we cannot afford because we have nothing to wait with. I blame both Democrats an Republicans because we are treated as if we do not exist. I, like thousands of others are making it through each day on a regimen of anti-deressants we can’t afford but it keeps us from doing harm to ourselves. I have gone to apply for Food Stamps explaining that I have no money coming in, and I need to feed my family NOW!!! I was told I would have to wait another 30-45 days. Only God knows where we will be in that time. You are not to blame, but ignorance is a choice we sometimes make when we are afraid to look at the truth. Thank You,
Allen
Allen is correct, i agree,time lost never comes back
Recession is far from over and very little of the stimulous has been spent. What actually happened is that the GDP went down so far that any improvement or order of large mfg items from other countries kicked the DGP up a bit.
This new administration is intentionally destroying free enterprise and for you to report otherwise is a crime against the American people.
JL Mealer
Mealer Companies LLC
http://mealercompanies.com
America’s Next Major Automaker
& 100% Self-Regenerative-Fueled
High Capacity Electricity Producing Device MFG
The soul of the economy has shifted, from a career mentality to the freelance economy. I recommend multiple streams of income to protect you from losing that one job. For more, see How to Find Work in the Freelance Economy.
Kimberly
The recession is over – the suffering is not. “Recession” is nothing more than a technical term that clicks in when two consecutive quarters of negative GDP growth are recorded. Meanwhile millions of Americans are going through what Allen is experiencing. So in a social sense, for Allen and millions of others neither the recession nor the depression (for them) has ended. Moreover, we have to be careful about celebrating. Even a dead cat will bounce if it falls from a high enough perch. While GDP showed 3.5% growth (coming off a very low base), new home sales FELL 3.6% against a forecast of a 2.6% increase. Disposable income fell 0,5% and unemployment continues to rise. The “recovery” such as it is, is spotty and fragile. When people like Allen start finding jobs so they can support their families with dignity we can break out the champagne. The tragedy of this particular downturn is that people who never thought they would lose their jobs have lost them. They are the victims of fools who had (and apparently still have) no concept of risk and the enormous damage it can cause if left un-managed. I confess that at the personal level I am embarrassed and saddened for Allen and others in his situation. Only when the USA returns to producing “stuff” will we begin to see a return to prosperity and even then we will still be poorer than before. We wandered deep into the woods and coming back out won’t be quick or easy.
I am just curious why government spending is used in calculating the GDP. Is this just not money that was taken from the GDP in the first place. Oh, I forget, they can just create money out of thin air, so then can’t we just include the trillions of new dollars they are printing as a GDP increase? Now, my next question would be what the actual increase would be if you factored in the decrease of the value of the dollar?
Hi Greg,
What is included in GDP and why is kind of the question of the day. See my articles on Spending to Help Vets and The Real Wealth of Nations.
Kimberly
Maybe you missed the sarcasm in my first few sentances?
Greg, I totally get the sarcasm and actually kind of agree. That is the point I am trying to make…why are some things measured and others are not.
In other words, what is measured in GDP is decided by someone, and reflects the values of the society. So, evidently, our society values government spending as an economic activity in and of itself.
To your point, government spending does not really “produce” anything. It is just a way of moving our money around from one pocket (the taxpayer) to another (someone our elected officials feel is more deserving).
Military spending is the ultimate – we pay tax dollars to blow things (and people) up. Instead of producing, it is destroying.
Read my articles, and Riane Eisler’s book, to understand that, yes, I do get your sarcasm…and your point!
Kimberly