If you are like me, you feel edgy about this recession.  Just as I missed some of the signs that landed us in this nightmare, I think I am missing the signs that media experts say have us in the recovery mode.  While the pundits remain the experts, I remain an uninformed and misguided novice whose retirement fund has plunged along with the value of my home and just about everything else.

Around the country, personal finances are under pressure and the news around the neighborhood is pretty discouraging as well.  Frankly, there are a lot more people looking for work and uneasily clinging to jobs than there used to be.

So, why exactly is the CNBC brain trust talking recovery?  They must know about a secret formula or some specific parameters that signal the end is near.

The DOW is still way below where it was when my portfolio felt healthy.  Every day it seems there are more foreclosure signs within walking distance.  I hoped that a historical look at recessions of the past could teach a lot about what we can expect going forward.

Looking back, it was pretty clear that the recession will be over long before it is officially dead.  The most recent recessions were in 1973-1975, 1980-1982, 1990-1991 and 2001-2002.

The National Bureau of Economic Research (NBER) finally acknowledged the end of the 1990-1991 recession 9 months after it had already ended.  The bottom was not called on the 73-75 recession until 21 months after that recession concluded.  I no longer feel like I missed something.

Even though CNBC is excited about the market’s performance, from my layman’s perspective, it just does not feel like this thing is under control or nearing an end.

Four Criteria

The definition of a recession is “a significant decline in economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment, industrial production and wholesale-retail sales.”

Please excuse my ignorance, but why is this thing supposedly over?  The GDP is dismal, personal income is still shrinking, employment is tearful and yesterday’s industrial and wholesale-retail numbers were pitiful.  Granted I do not understand a lot of things, like why it is okay that unemployment is topping 7 million and that 350,000 Americans filing new claims is a good thing, but what do I know?  Like you, I want to believe that Happy Days are Here Again, but?

There are four basic criteria that will signal the end of the recession.  After each item, I listed a link where readers can go to see how we are really doing:

• Employment – www.bls.gov/news.release/empsit.toc.htm
• Personal Income – www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N#S2 – scroll to item 2.6
• Industrial Production – www.federalreserve.gov/releases/g17/current/default_sup.htm – click Current Monthly Release, scroll to Total Index on the Industrial Production and Capacity Utilization: Summary Chart
• Manufacturing and Trade Sales – www.census.gov/mtis/www/mtis.html – click the HTML link for Current Press Release

Now, you are set to track the recession.  When the signs are right, you might know the recovery is underway.

Key Indicators

Now that we have access to key information, what do we do with it?  What does it mean when the stock market is going up?  What are the repercussions of an improving GDP?  What makes something a lagging indicator?

The Conference Board is a non-profit organization that accumulates data about the global and national economy.  The Conference Board evaluates ten critical factors that reflect the direction of the economy:

• The average weekly hours worked by manufacturing workers
• The average number of initial applications for unemployment insurance
• The amount of manufacturers’ new orders for consumer goods and materials
• The speed of delivery of new merchandise to vendors from suppliers
• The amount of new orders for capital goods unrelated to defense
• The amount of new building permits for residential buildings
• The S&P 500 stock index
• The inflation-adjusted monetary supply
• The spread between long and short interest rates
• Consumer confidence

These factors can tell us a lot about what is actually going on out there.  Every recession has its own characteristics and the Obama Administration has played heavily into untangling the chaos.  The role of government may well be influencing the path of the recession.  After all, there is still more than $700 billion in stimulus finding waiting to enter the economy.

As we assess the status of the recession, we should keep in mind that unemployment is expected to approach 10%, the damage to the Japanese and the German economies is hurting U.S. trade, the commercial and residential real estate markets are dismal and manufacturing continues to slide.

The facts point out that the country has been mired in this recession for more than a year and a half and the economy has been stagnate for close to three years.  While we may have found a bottom, we have not begun to dig ourselves out.

The biggest fear is that the recovery will flounder.  While no single factor will cause or end a recession, unemployment and housing appear focal points that need attention.

Recessions are marked by periods of pullbacks.   The economy could be devastated by a major slide.  This is the fear that inspired the stress tests for banks.

If that downturn comes, we can thank Secretary Geithner for putting the banks in position to respond.  If a recession is characterized by several months of decline, the recession’s end must be characterized by several months of recovery.

Month over month numbers simply do not measure up.  In an economy where life often seems a day-to-day proposition, let’s hope some of those monthly reports start to show some light at the end of the tunnel.

This entry was posted on Tuesday, June 16th, 2009 at 10:26 am and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.