Is the U.S. Economy in a Recession?
Everybody has an opinion – and a certified perspective – on the current status of the U.S. economy. Some say we are experiencing a contraction. Others call it a correction. These definitions are commonly interchanged among a broad population of pundits who believe we are in a recession. However, there are other commentators with similar credentials who are painting a more pleasant picture, stating that the U.S. economy is a robust engine and that we may have been in a mild – and necessary – pullback, but one from which we have already emerged.
Charts are referenced; individual company stocks in select industry sectors are deemed economic bellweathers; historical economic indicators are scrutinized, and obscure data is repositioned as foundation-oriented. Under such sophisticated numerical manipulation, it is understandable that consumers and business leaders alike are uncertain about the state of the U.S. economy.
President Bush’s May 2nd national radio address focused on the economy and cited April as the fourth month in a row where the economy has shed jobs. He also addressed rising food and fuel prices – and touted the $150 billion economic growth package he signed in February, with the hope that the rebate will stimulate economic growth.
While some see these measures as political in a political year, not everyone agrees that we are in a gloomy period.
In its first summer foreign travel forecast, AAA estimates that “25.1 million Americans will be traveling internationally this summer, an increase of 2.6 percent over the 24.5 million who were estimated to have traveled overseas last summer.” The AAA report is inclusive of all travel outside of the United States – including Canada and Mexico. Given the dollar’s current weakness, the AAA report reflects both optimism in the future and a short-term willingness on the part of consumers to spend. If the U.S. economy is really experiencing a recession, travel – particularly foreign travel – would be forecast to undergo a significant contraction.
Howard Gold, executive editor of MoneyShow.com, is among the voices questioning the validity of a U.S. recession. “There’s little evidence that we’re in either a bear market or a recession, defined, respectively, as a 20% drop in the major stock market averages and at two consecutive quarters of negative gross domestic product growth,” he said.
Some define recessions in terms of unemployment rates. In April, the unemployment rate sat at 5%. Mr. Gold’s analysis points to a more colorful history. Unemployment “averaged nearly 10% in 1982 and 1983, roughly 7% in 1991-1993 and 6% in 2002-2003 – during real recessions.”
So, what is the U.S. economy experiencing? Global energy demand appears to be influencing prices and feeding a universal inflation. The credit crisis is directing the debt-laden American consumer to rethink day-to-day purchases. The dollar is at a low against every benchmark currency.
But are these growing pains? Beyond the lending crisis, is the American economy adjusting to a new global affluence – born of worldwide trade?
While it is not comforting, time will best yield the answer.
Tags: Economy , Recession , America , Credit , Lending , Energy , Finance , Stocks , Business , Bush
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