There are classic signs indeed that the recession in the U.S. ended last summer — output, sales, etc. But the depression is ongoing and the reason we say that is because real personal income, excluding handouts from the government, has barely budged. In fact, real organic personal income is nearly $500 billion lower now than it was at the peak 16 months ago and this has never occurred before coming out of any technical recession. It is a depression, as the chart below attests — that is the trendline for real household incomes, until the government comes in to top them off with handouts, subsidies and extended jobless benefits. The share of U.S. personal income being derived from Uncle Sam’s generosity has risen above 18% for the first time ever.What's going on here? Simply put, a recession is defined solely in terms of overall GDP. If the GDP declines for two consecutive quarters, the economy is considered to be in recession; once it gets back on a solid growth track the recession is considered to be over. We normally think of a "depression" as simply a large recession, but I think Rosenberg is suggesting that it should be seen as a measure of how people are actually faring (what a radical idea!) So a "jobless recovery", or a recovery in which people are going back to work but at lower wages, would be a continued depression, because people's actual wages are depressed.
Sunday, May 16, 2010
More on that "recovery" thing
It's become a mantra in the mainstream business press to say that we're in a recovery. But what does that mean? David Rosenberg has this to say (h/t pogge):