You Say Recovery, I Say Potato
My latest Marketplace commentary returns to a topic I touched on earlier this week: the fact that when economists talk about a “recovery” being underway they are talking about something completely different than when Joe Public says he’s waiting for the “recovery” to begin.
In putting the piece together, I found a nice quote from Christina Romer. Romer is an interesting player, both because she chairs Obama’s Council of Economic Advisors, and because she was previously a member of the NBER’s Business Cycle Dating Committee, the semi-official arbiter of when recessions end and recoveries begin. So she combines economic savvy with a need to also connect with the general public. I thought she gave the perfect answer a few weeks back on “Meet the Press,” when asked whether the recession had ended:
You know, there’s the official definition, and that talks about just when do you turn the corner, when do you go from plummeting to, to finally starting to go back up? And I think we have, at least in terms of GDP, reached that point. But I think the president’s always said, and what I firmly believe, you’re not recovered until all those people that want to work are back to work.
Her distinction, between a “recovery” (which we may well be in), and the economy having “recovered,” is an important one. These two terms have become too easily confused in the current policy debate. Inflation and deficit hawks have argued for less expansionary policy because a recovery may be underway. I’m not sure I grant the premise — I’m yet to be entirely persuaded that the recovery has begun. If it has, it is certainly somewhat faltering. More importantly, policy should be focused not on whether a “recovery” has begun, but on whether the economy either has “recovered,” or is expected to do so in a timely fashion. On this score, it’s clear: we are years and years away from an economy that has recovered from the Great Recession.
You can listen to my full commentary here.