Recession may finally be ending
The recession isn’t over quite yet, but the end is in sight – in the second half of this year, Federal Reserve Chairman Ben Bernanke has told Congress. Considering the Fed’s usually dour pronouncements, this constitutes giddy optimism. The markets seemed to agree. The S&P 500 stock index recovered from its 12-year low on March 9 and surged back to where it was at the beginning of the year, basically erasing its losses since January. The housing market is showing faint signs of a pulse; consumer spending, which drives the economy but cratered last year, is picking up, buoyed by the tax cuts; and there are signs of life in the credit markets. The banks’ capital needs seem less dire.
And that massive $787 billion stimulus package has yet to kick in.
There are still some discouraging areas. Business investment is “extremely weak,” Bernanke said, and the commercial real-estate market remains in the tank. But even the bad news is less bad than it was. Private analysts cited by the Associated Press say the economy will shrink from 1 percent to 3 percent in the current quarter, not good but nowhere as bad as the 6 percent contraction for the six months through March, the worst consecutive quarters since the 1950s.
And then comes the third quarter of 2009, when we can reasonably begin looking for more solid signs of a turnaround.
The one grim prognosis as the economy turns the corner is unemployment, always the last economic indicator to recover from a recession.
Since December 2007, the official start of the recession, the economy has lost over 5 million jobs. And the carnage will continue.
Unemployment, now at a 25-year high of 8.5 percent, is expected to climb still higher, to more than 9 percent, according to Bernanke.
The job market probably won’t begin recovering until next year. Housing, banking, credit, consumer spending, commercial real estate, business investment – all may start picking up this year, perhaps with some real momentum, but it’s not a true recovery until everybody’s working.