Eye on the Pie and Opinion and Economic Recovery

MARCUS: The recovery is over ... or maybe not

April 2, 2011

“I don’t believe you,” Lina Lassie said as we stood at the grocery checkout.

“It’s true, nonetheless,” I replied, hoisting my six-pack to the conveyor belt. “By several measures, not only is the recession over, but the recovery as well is complete. We are on to the expansionary part of the business cycle.

“At the close of 2010, Indiana’s personal income stood 2.02 percent above its level in the second quarter of ’08, the peak before the recession started. Every state except Nevada has exceeded the level it enjoyed in that quarter. We rank 32nd, behind West Virginia, which is at 7.3 percent above its 2008 second-quarter figure.”

“Do you make an effort to recall percentage points to the second decimal?” she asked.

“No,” I answered truthfully. “Some just stick with me. What fascinated me was that the recession in personal income (that’s wage and salaries, plus the cash value of benefits, self-employment income, unemployment compensation, Social Security, Medicare, Medicaid, plus dividends, interest and rent) … ”

“And what fascinated you was … ?” Lina prodded.

“What fascinated me was that the recession in Indiana and the nation lasted only three quarters. But the Hoosier recovery took six quarters, while the nation as a whole required only five quarters. Also the recession in earnings (what people make from working for themselves or for others) started a quarter before the recession in personal income.”

“You’re joking,” she exclaimed. “You find that fascinating? What kind of a boring life do you lead?”

Polite as ever, I pondered her remark before objecting. “The recession and recovery were not boring. They adversely affected millions of families. If we had read the data from the Bureau of Economic Analysis properly, we might have seen the problems sooner and taken measures to minimize the negative effects.

“In the second quarter of ’07, earnings of Hoosiers working in real estate began to fall. That was a full year before the total personal income for the state began to descend. By the close of 2010, those earnings were still 7.4-percent below their peak.  

“Next, earnings in retail and wholesale trade peaked and started their decline. With fewer goods to move around, transportation earnings started their descent. Because the real estate decline signaled less demand for new and existing homes, a general falloff in construction and manufacturing followed. The retail decline stopped construction of new shopping centers and backed up inventories, which made additional manufacturing unprofitable. And the dominoes fell.

“It took another half-year before dividends, interest and rental income peaked out. Hoosiers fortunate enough to have such assets fared better than those dependent on wages and salaries. After five quarters of decline, wages and salaries rallied in the third quarter of ’09, but at the end of last year were still 2 percent off our all-time peak.

“The worst problems remain in construction (still off 15 percent) and manufacturing (remaining down 6 percent) … ”

“Enough,” Lina snarled as her order was tallied. “I get the point: The data tell the story. But it’s the story and its telling that are interesting, not the dull recitation of the data.”

“If you require a ‘Bourne’ movie to get excited by the data, you, not the data, are at fault. If you cannot see and feel the human element in the numbers, it is your deficiency,” I responded with steely calm as my simple purchase was rung up.

It was, however, too late. Lina had stormed off with her packages and my beer.• 

__________

Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.
 

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