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Video: Is the recession over?

By John W. Schoen Senior producer
msnbc.com
updated 10/29/2009 2:17:18 PM ET 2009-10-29T18:17:18

Even though the nation's economy showed growth in the third quarter for the first time in more than a year, don't assume that the Great Recession of 2008-09 is over.

For a reality check, try asking Larry Van Sant, who owns a plumbing and heating business in Mount Airy, Md.

“I don’t think this recession is over by any means,” said Van Sant. He said business is so slow he has had to lay off 68 of his 168 employees. “We normally can look and tell it’s over before anyone announced it’s over.”

Van Sant is one of hundreds of msnbc.com readers who sent e-mails disputing the view of many mainstream economists who say the recession, which began in December 2007, might well have ended over the summer. And with unemployment at a 26-year high of 9.8 percent, the skepticism is understandable — despite figures released Thursday showing the nation's gross domestic product grew at a 3.5 percent pace in the latest quarter, the best showing in two years.

“I get upset every time I hear or read in the news that the recession is over and the economy is recovery,” said Janice Benson, owner of a small real estate office in Bend, Ore., where she lives with her husband and son. “The president’s stimulus package only helped the banks and a few special groups. It did not help mainstream America.”

President Barack Obama took an optimistic, but cautious, tone about the GDP data. In remarks Thursday to a small business group, he said the economy "has come a long way" since early this year, but added "we have a long way to go to fully restore our economy."

“In my view, the economy has not picked up,” said Zoltan Rab, a research analyst in Greensboro, N.C., who lost his job in May 2008 and was out of work until December. "The weak state of the economy is quite visible. I think it is simply irresponsible to make average citizens believe otherwise.”

Part of the disconnect between upbeat forecasts and the skepticism expressed by many readers  starts with the definition of a recession.

Contrary to popular misconception, a recession is not necessarily over even if the economy shows two consecutive quarters of positive growth as measured by gross domestic product. The start and end dates of U.S. recessions are established by the National Bureau of Economic Research, a research organization whose conclusions on business cycles are widely accepted. The NBER's Business Cycle Dating Committee looks at a variety of statistics — including GDP, employment, and industrial production — before determining the beginning or end of a recession.

Jeffrey Frankel, an economist at the Massachusetts Institute of Technology and a member of the committee, said he and other analysts want to see signs of a convincing and lasting recovery before declaring the recession is over. Although he thinks the recession ended in July, he also believes there is a one in three chance the recovery may stall out next year.

“If a new downturn made us reconsider, we’d call that part of the same recession,” he said. “So we wait.”

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(Click here for the committee's comments on the current recession and answers to frequently asked questions.)

For many Americans, their view of the economy depends on where they live. Just as some parts of the country have been harder hit than others by the downturn, the recovery will be stronger in some regions and lag in others.

The latest Adversity Index from Moody's Economy.com and msnbc.com shows that only one in five of the 384 metro areas in the United States has moved from recession into the "recovery" category, based on August data on jobs, manufacturing and housing. The recession is "moderating" in another 270 areas, meaning the contraction in those economies is slowing; some 35 metro areas are still in full-blown recession.

The recovery also will be uneven from one industry to the next. In the industrial Midwest, many of the manufacturing jobs lost to the recession may never come back. That’s forced millions of workers to try to retrain themselves for a new career.

Alan Dustan, 54, works as a career guidance specialist for Maricopa County in Phoenix, Ariz.  While his office has been a sharp pickup in jobless workers, he also sees many of them turning to new careers in industries that are hiring.

“With so many retirees coming out here, health care has taken on a major role," in the economy, he said. “I see a lot of people that have been in, say, the mortgage business for 20 years and now they’re going to back for 42 weeks to get their (nursing) license."

Much of the optimism about economic recovery centers on upbeat news from the housing industry over the past few months. Sales have picked up and prices seem to have stabilized and begun rising again in some parts of the country.

But at least some of that improvement stems from the $8,000 tax credit extended to first-time home buyers. And many sales are going to investors snapping up foreclosed homes at distressed prices. With the tax credit set to expire next month, and the foreclosure rate showing no signs of easing up, Goldman Sachs economist Alec Phillips cautions that the recent upturn could be temporary.

“The risk of renewed home price declines remains significant,” he wrote in a research note last week. "And our working assumption is a further 5-10 percent decline by mid-2010.”

Though residential housing may be nearing a bottom, commercial real estate is in a steep slide. The pace of layoffs has slowed, but the labor market remains "weak across all Districts," according to the latest economic report card from the Federal Reserve’s “beige book” survey. 

As long as those layoffs continue, it’s hard to see how an economy based largely on consumer spending can stage a strong recovery. Though the “official” jobless rate is at 9.8 percent, the government’s broader measure — which includes categories like “discouraged” workers who’ve given up looking for work — stands at 17 percent.

While stock prices have surged on Wall Street since the spring, consumers remain pessimistic about the economy and their own finances. The latest NBC/Wall Street Journal survey, released this week, found 49 percent of Americans "very dissatisfied" with the state of the economy, up from 41 percent last month.

Consumer confidence fell in October as job prospects remained bleak, the Conference Board reported this week. That added to worries that an already gloomy holiday shopping forecast could worsen. With the exception of the “Cash for Clunkers” program subsidizing car sales, spending remains flat in most categories.

The mismatch between economic data and public perception may also indicate sharp differences in attitudes based on where people are on the economic ladder, said Frankel.

“There is an income distribution issue,” he said. “If the overall economy is growing but the benefits are accruing to a minority of wealthy, then you can easily explain why the majority view is that things are not getting better.”

An uptick in the GDP data used to measure economic growth can also been seen as a sign that the recession has stopped getting worse. Once the economy begins growing again, it won’t feel like prosperity has returned until the nearly 8 million people sidelined by the recession have found jobs again. That process could take years: Even the most optimistic forecasts look for weak growth through 2010.

NBC News’ Alex Presha and Bernard Lubell contributed to this story.

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