Economists use statistics to pinpoint when recessions start and end. It’s much tougher to measure the stages and health of a recovery in progress.
The start of the Great Recession can be traced to December 2007, and the economy began to slowly expand again by June 2009. Until recently, most economists simply agreed that the recovery, marked by excruciatingly slow job growth and little or no wage gains, was frustrating and disappointing.
But it’s getting harder to miss America’s increasingly strong economic signals now.
The most recent US jobs report showed an impressive 321,000 new positions created in November, and average American wages are finally starting to rise substantially. That seemed to jolt many economists into believing the current expansion has entered a new phase.
These might not be boom days. But the economy is definitely strong now — and getting stronger.
The November jobs report marked the 10th straight month of net job gains exceeding 200,000. It pushed total US employment to about 140 million workers, just above its pre-recession high. The unemployment rate has fallen to 5.8 percent.
And last month’s wage gain of 0.4 percent — twice as high as most economists had expected — suggests that workers are finally gaining enough leverage with employers to demand higher salaries.
“At some point, the steadiness of the improvements has to be taken into account and it becomes the story,” said Gary Burtless, an economist at the Brookings Institute in Washington, D.C. “So, yes, I’d say this has now become a strong recovery. Just the sheer number of months of solid private-sector jobs growth has been impressive.”
Other economists agree that the recovery seems to have entered a new stage in recent months.
“We’re finally off and running,” said Mark Zandi, chief economist at Moody’s Analytics, a research subsidiary of the rating agency Moody’s Corp. “Obviously, there are still problems and risks out there. But we seem to have kicked into a higher gear, and that’s good.”
Besides jobs gains and wage growth, Zandi points to other signs showing major improvements in the economy since the dark days of the Great Recession.
He noted that automobile sales recently hit an annualized rate of 17 million vehicles, roughly where they were before the recession and significantly up from a low of 9 million sales during the depths of the recession in 2009.
Inflation remains low at about 1.7 percent, meaning any wage gain above that is extra money in the pockets of consumers to spend. With annualized wage increases now running at about 2.4 percent, workers are finally starting to make real, if small, gains in their incomes, Zandi and others said.
Meanwhile, the price of crude oil has fallen by more than 40 percent since June, driving down gasoline prices to a national average of $2.62 last week, from about $3.25 a year ago. That’s about $90 billion in annual savings for consumers, economists said.
‘We’re finally off and running. Obviously, there are still problems and risks out there. But we seem to have kicked into a higher gear, and that’s good.’
And US stock markets have more than recovered from the brutal beatings they took in 2008. The Dow Jones Industrial Average, for instance, was hovering around 17,500 last week, up from a low of about 8,400 in 2009 and well above its pre-recession high of about 13,930 in 2007.
The federal government’s annual budget deficit, the subject of much political debate and controversy in recent years, also fell to about $483 billion as of the third quarter. That was its lowest level since 2008 and represented the sharpest turnaround in the government’s fiscal position in 46 years, according to Bloomberg News.
But the economy still faces serious problems and challenges. About 7 million workers who want full-time jobs are still involuntarily stuck in part-time positions, often without health care insurance and other benefits.
The so called “U6” unemployment rate — which measures people without work, those in involuntary part-time positions, and discouraged workers who have recently given up on finding jobs — stands at just under 12 percent, a historically high figure compared with past recoveries, economists noted.
In addition, the nation’s housing market hasn’t fully recovered, despite historically low mortgage rates. Median home prices are still about 10 percent below their prerecession highs, meaning many Americans are living in homes that aren’t worth the price they paid last decade.
Significantly, new home-construction starts have recently risen to an annualized 1 million, up from only 500,000 housing starts in 2009. But that’s still down from 1.7 million housing starts during typical economic recoveries, Zandi said.
Joseph Brusuelas, a New York economist at the consulting firm McGladrey LLP, said he’s impressed with the current economy, considering the severity of the recent recession and the lingering aftershocks of last decade’s housing market and financial crashes.
“There are reasons to be optimistic,” he said, noting the US economy is currently outperforming the economies of other industrial nations.
He predicts more growth next year but notes the economy still struggles in some key areas.
“It’s lagging compared to past recoveries,” he said. “Still, compared to where we were a few years ago, it’s definitely improved. Definitely.”Jay Fitzgerald can be reached at firstname.lastname@example.org.