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The end of the Great Recession
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The Commerce Department on Thursday reported that the U.S. economy grew at a real (inflation-adjusted) annual rate of 3.49 percent in the third quarter of this year, marking the unofficial end of a severe, if relatively brief, year-long recession.
Jobless claims also fell, but only slightly, and both White House and private economists expect the unemployment rate to top out at somewhere around 10 percent before starting downward.
The recession-recovery phase of this latest business cycle is almost classic, as explained in theory in my September 28, 2009, article, "Anatomy of an economic recovery," buttressed by earlier data in my subsequent, October 3, 2009, article, "Signs of a good recovery ahead ": under the strong counter-cyclical stimulus of the $787 billion bill passed by Congress in the late Winter of this year, the economy's latent productive strength rebounded in short order, although the damage to families from unemployment will persist, as will the effects of the foundation-shaking collapse of the American auto industry and the financial services sector, the latter of which is still reeling under bank closures, the latest being described in my October 31 article, "Banks owned by Oak Park, Ill., company seized."
Although the figures for third quarter GDP will be revised twice — with the first revision coming on November 14 — people should expect to see the Federal Reserve relatively quickly turn its attention toward fighting the looming prospect of inflation, which is now of even greater concern because of what appears from the early data to be a fairly robust jump out of the recession.
As the Fed clamps down on the money supply to drain years of excess liquidity out of the economy, interest rates will start to rise noticeably. Oddly, this should fuel an increase in home buying as prospective purchasers move to lock in lower interest rates. This, in turn, should help sustain the recovery, giving the Fed somewhat more leeway to clamp down on the money supply without throwing the economy back into recession.
The road ahead is nonetheless perilous, but that good recovery described in my previous articles appears to be underway, now; and regardless of political leanings, people of goodwill should celebrate the success of our nation and its leaders of both parties who have participated in bringing us to this glad event of saying farewell to the Great Recession of 2009.
