The UK Is Back In The Recession It Never Came Out Of. In Reality The USA Is No Different
The definition of recessions has altered over the years and varies from country to country and continent to continent. In the UK A recession is defined as two consecutive periods of negative growth. In the USA the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as:
a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Almost universally, academics, economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession’s onset and end. In short if growth ‘goes negative’ in the USA then the country is in recession.
According to economists, since 1854, the U.S. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion. However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more, and four periods considered recessions.
USA recessions since 1980
July 1981 – November 1982: 14 months
July 1990 – March 1991: 8 months
March 2001 – November 2001: 8 months
December 2007 – June 2009: 18 months
For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. While the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth. The US recession of 2007 ended in June, 2009 as the nation entered the current economic recovery.
The unemployment rate in the US grew to 8.5 percent in March 2009, and there were 5.1 million job losses until March 2009 since the recession began in December 2007. That was about five million more people unemployed compared to the year prior, which was the largest annual jump in the number of unemployed persons since the 1940s.
UK Recessions Since 1970
Mid 1970s recession 1973-5, 2 years (6 out of 9 Qtr). Took 14 quarters for GDP to recover to position at the start of recession after a ‘double dip’.
Early 1980s recession 1980- 1982, 2 years (6 – 7 Qtr). Unemployment rises 124% from 5.3% of the working population in Aug 1979 to 11.9% in 1984. Took 13 quarters for GDP to recover to that at the start of 1980. Took 18 quarters for GDP to recover to that at the start of recession.
Early 1990s recession 1990-2 1.25 years (5 Qtr). Peak budget deficit 8% of GDP. Unemployment rises 55% from 6.9% of the working population in 1990 to 10.7% in 1993. Took 13 quarters for GDP to recover to that at the start of recession.
Late 2000 recession, 1.5 years, 6 quarters. Output fell 0.5% in 2010 Q4. The unemployment rate initially rose to 8.1% (2.57m people) in August 2011, the highest level since 1994, this has subsequently been surpassed. As of October 2011, after 14 quarters, GDP is still 4% down from the peak at the start of recession.
How The Recovery Was ‘Bought’
The USA 2008/2009 recession figures illustrate just how stagnated the USA is and how little genuine ‘progress’ has been made. Despite all the hype and misdirection the reality is that the USA is still in recession. In March 2009 unemployment was 8.5%, today it’s 8.5%. By March 2009 5.1 million had lost their jobs, estimates now suggest it’s circa 9.0 million net job losses from 2007-2012. Despite efforts to spin it otherwise there is no such phenomena as a ‘job-less recovery’, the USA is still mired in the trench of a deep recession. The USA would need to create circa 400,000 jobs per month over a sustained period of circa three years, in order to get back to pre 2007 levels of employment.
The facts and figures, relating to the bailouts, rescues and quantitative easing programmes in the USA, have been drip fed or force fed due to Bloomberg’s intervention through the courts. Moving aside those figures the debt ceiling hasn’t been disguised. The received wisdom is that for every two dollars of growth the USA has ‘bought’ eight dollars of debt. Leaving aside the real damage of purchasing power this has caused, due to carefully disguised inflation, the evidence of the debt ceiling is there in black and white as to how the recovery is in fact an illusion.
The debt ceiling has been raised by over 40% since 2008. Estimates suggest that a massive $5.2 trillion has been raised in order to effect a ‘recovery’, a recovery that still sees the most flattering (U3) measurement of unemployment back where it started, at 8.5%. Despite all the bailouts and rescues (secretive or published) the ‘tarp’ programmes and debt ceiling raises the USA is flat, ergo it never came out of recession, a duplicitous public relations exercise has been spun.
The UK comparison is remarkably similar, as is Europe’s. The UK unemployment rate is at 8.5%, yet the unemployed numbers are at their highest levels in seventeen years and according to a govt survey there are 3.9 million households with no ‘wage earner’. There are circa 4.8 ml UK adults on out of work benefits and 400,000 jobs available at any given time. And with employment of circa 20 million this job availability represents a normal statistical rate of ‘churn’, 2%. Similar to the USA, but on a smaller scale, both UK administrations attempted to ‘buy their way out’, leaving the UK with the staggering combined GDP v debt ratio of over 900%, the worst in Europe which (as an aside) is why many commentators and European politicians question the UK’s AAA rating.
The reality for both the UK and the USA is that they never left the recession, and as many suggested (after the event horizon of 2008) in attempting to avoid a recession the powers that be destined both countries for a depression like state not witnessed since the 1930’s.
If I can borrow an American phrase the UK, European and USA political leaders need to ‘fess up’ to their public with regards to the current situation. Whilst short term re-election is their goal the fact remains that all areas have remained in a recession ‘range’ for four years. Despite the largest infusion of money creation witnessed since the modern day banking system was introduced ‘growth’, as measured by the fundamentals most use; jobs, luxuries, modest savings, hasn’t occurred.
If we strip away the overall rescue packages and ignore the dubious benefits thereof, the USA is now in arguably its 48 month of recession, the UK and Europe are in their 35-37th, making this recession the worst in modern ‘recorded’ times. All three administrations might want to consider having an honest and frank debate with their prospective electorates before the dislocation between reality and spin becomes as immeasurable as their conjured and misleading figures.