As you've probably heard, the Great Recession is either over, or will be over by the end of the year.
Then the Labor Department comes out with the statistic that unemployment has just hit a high of 9.7 percent, a rate not seen since 1983. And many economists think it will continue to rise to more than 10 percent. So are we in a recession or aren't we?
It depends on your definition of recession.
In economics textbooks, a recession commonly is defined as two consecutive quarters of negative gross domestic product growth. Well, that's not really true.
We also could compare the current level of GDP to the level of GDP the economy potentially produces. Periods when GDP falls below potential are considered contractionary. But, that's not really it, either.
No, what determines the exact timing of a recession is an institution called the "Business Cycle Dating Committee" housed at the National Bureau of Economic Research, or NBER. This group meets to discuss a variety of economic indicators it believes signal the ups and downs of the business cycle including: GDP, personal income, sales, industrial production and employment.
And generally, it doesn't announce a recession until we are well into the recession or, in some cases, after it came and went. Hence, the formal announcement of the Great Recession wasn't made until we'd been in it for 11 months.
But at the end of the day, who cares if we know the exact timing of a recession when unemployment rate is continuing to rise? What gives? Well, unemployment "lags" output. Firms continue to shed workers even as they increase output.
My main concern is not so much that unemployment will continue to rise - though that is a concern, too, obviously - but the post-recovery economy will have a fundamentally different, and higher, unemployment rate.
I foresee a structurally different economy with a higher "normal" unemployment rate. Over the last 20 years or so, we've become accustomed to unemployment in the 3 to 5 percent range. But, there's no reason to expect those rates to continue to be the norm: Remember the '70s and '80s when we would have been happy with 6 or 7 percent unemployment?
The stimulus package has - make no mistake - prevented the recession from being much worse. It's compensated for the decrease in household spending and helped buoy labor markets.
But there still is a bunch of money in banks seemingly going nowhere. Why? Well, no one's really sure. My guess is, overall, the banking industry views economy-wide systematic and idiosyncratic default risk as too high.
The economy's likely tepid recovery does not breed confidence. Nor does a high loan-credit default rate. Moreover, weak labor markets - mean the duration of unemployment is at 25 weeks. Loan demand also is lower. Couple this with complicated lending rules and you have little cash flowing into financial markets.
As I've said before, the recession may be over, but we will relive a "jobless" recovery. In Colorado, the 2001 recession lived on well after the country moved on, and evidence suggests that this one will be no different.
firstname.lastname@example.orgRobert "Tino" Sonora is an associate professor of economics and co-director of the Office of Economic Analysis and Business Research at Fort Lewis College.