By Mark Huffman
ConsumerAffairs.com
October 29, 2009
The current recession officially began in December 2007 and strong evidence emerged Thursday that it may be over. Though the jobless rate remains just under 10 percent, preliminary estimates from the government show the economy grew by 3.5 percent in the third quarter.
The Gross Domestic Product (GDP) is the total of goods and services sold in the economy. Two straight quarters of decline signals the onset of recession while two straight quarters of gain signal its end.
In the case of the third quarter numbers, economists are particularly pleased that the increase appears to have been led by consumer spending. According to the Commerce Department report, consumer spending contributed 2.36 percentage points to GDP growth.
The strong third quarter numbers are not that much of a surprise, considering the amount of government stimulus pumped into the economy over the period. While much of the $700 billion in new spending approved by Congress in February has yet to be spent, the government's Cash for Clunkers program in August resulted in billions in new auto sales. Also, the government's first time home buyer tax credit, set to expire at the end of November, provided some life to an anemic housing market.
Despite the positive move, however, the economy still remains weak. Retail sales have stabilized, but at levels far below previous norms. Many businesses have regained profitability by laying off employees and otherwise cutting operating costs.
While the stock market has enjoyed a robust rally since March, the housing market has not, Home prices continue to decline and, more distressingly, foreclosures continue to rise. Many consumers seeking to modify their mortgages to more affordable payments report frustration, as banks refuse to change the loan terms, or worse, simply proceed right to foreclosure.
But that's how recoveries usually progress. The stock market is said to be a leading indicator of an economy's progress while employment is seen as a lagging indicator. So while things may be getting better, it may be a while before the average consumer notices.
