TEXT OF COMMENTARY
Kai Ryssdal: Two-and-a-half years ago, when the credit crisis was just starting to get a lot of attention, and the economy was just starting to slow down, in pretty much every interview I did I asked some version of this question: When is it going to start getting better? The answer was always, oh, about six or nine months, maybe. And then, six months later, I would ask the same question: When is it going to start getting better? And the answer was, oh, six months. Maybe nine. Drove me nuts.
Commentator and economist Justin Wolfers knows the feeling.
Justin Wolfers: Larry Summers, the head of the National Economic Council, recently said that “Everybody agrees that the recession is over.”
But by everybody, he meant economists. The public disagrees. A recent Gallup Poll found that nearly half of all Americans believe that economic recovery won’t begin for at least another three years.
What gives? It turns out that we’re all using the same words, but we each mean different things. And the definitions turn out to be critical.
The National Bureau of Economic Research provides the economist’s definition. They say that, “A recession ends when the economy reaches its trough.”
That means that the start of a recovery isn’t a bright point, but rather the low point. If the recession has ended and the recovery has just begun, it is only because things have gotten as bad as they are going to get. So it actually makes sense that things still feel dismal, even as economists declare the recovery underway.
But Joe Public’s definition of “recovery” is when the economy has returned to some level of good health. Perhaps he’ll call it a recovery when we “recover” the nine million jobs that have disappeared in recent years.
The public are interested in the level of the business cycle. Professional economists talk about its changes. And these days things are even more complicated, because the news is reporting the slowing rate at which we are losing jobs. That’s a change in a change!
Fortunately, Obama’s chief economist, Christina Romer, has sorted out this linguistic kerfuffle. She recently said, “There’s the official definition, and that talks about just when do you turn the corner… And we have, at least in terms of GDP, reached that point.” But, she said, “You’re not recovered until all those people that want to work are back to work.”
So, to cut though all this economic verbiage the bottom line is this: We are recovering. But this doesn’t mean we can ease up on economic stimulus, because we’re still a heckuva long way away from being recovered.
RYSSDAL: Justin Wolfers is an associate professor of business and public policy at the University of Pennsylvania’s Wharton School.
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