Slow Recovery Offers Little Comfort

Believe it or not, it all started nearly two years ago in October 2007 with the crash of the housing market. Unless you have spent the past two years with a Shaman in Peru, or you are in the top .01% of our economy, there has been an ominous cloud hanging over your head.

In October 2007 I read an article in the USA Today titled “Housing Turmoil a Risk to Economy.” In the article Henry Paulson, Treasury Chief, was quoted as saying the housing downturn posed the most "significant current risk" to the economy. He also singled out unsound lending practices, based on Interest only and adjustable rate mortgages, as the catalyst. Due to the events of the past two years we know that this was the first of several dominos that lead to the longest recession since the Great Depression.

Economic analysts look at the health of the housing market as the proverbial canary in a mine. The housing market is referred to as a leading indicator. In juxtaposition to the housing market is the unemployment rate, which is referred to as a lagging indicator. Typically, unemployment continues to increase for six months after the economy has begun to move into positive territory. Unemployment is expected to continue to rise through the end of the year. Its a case of it's going to get worse before it gets better. I know this is of little comfort to the unemployed and under employed.

An often-used barometer for the current health of our economy is the GDP growth rate. The numbers for the past month have been skewed heavily by the Cash for Clunkers program. A big item of news this past week was the .06% drop in GDP. It surprised a lot of analysts because they expected Cash for Clunkers to skew us into positive territory. I really believe that the GDP growth rate is really too broad of a measurement to be effective in such short intervals. For near term analysis I encourage people to look at the stock market, which has seen an even growth rate over the past few months. Not to mention a decrease in major daily swings.

Even a die-hard optimist like myself is finding this protracted recovery hard to swallow. This is the longest running recession since the Great Depression, which lasted 43 months. I feel that this trend of positive small-incremental growth leading to an eventually recovery does have some legs. 2010 will see new developments. But as our economy begins to right itself I have two concerns for our future: Have we learned our lesson as consumers? And, will this recovery include a place at the table for all parties?

Time will tell.