The recession may soon be over

What happened

The U.S. economy will emerge from the worst recession since the Great Depression by the end of September, according to a survey of the nation’s top economists, who point to a steady trickle of positive economic news. The gross domestic product contracted again in the second quarter of 2009, but at a rate of only 1 percent, and it is expected to rise this quarter—putting an official end to the recession. Home and auto sales have also risen slightly. These indicators prompted 90 percent of the economists in the Blue Chip Economic Indicators survey to pronounce the recession over. “Debate now centers on the speed, strength, and durability of the recovery,” said the survey.

Last week the government reported that for the first time in months, in July the U.S. lost fewer jobs than in the previous month. Employers cut 247,000 jobs last month, down from a high of 741,000 in January. But the dip in the unemployment rate from 9.5 percent to 9.4 percent was slight, and most economists believe shell-shocked employers will not begin hiring again until sometime in 2010. “The worst may be behind us,” said President Barack Obama. “We’ve rescued our economy from catastrophe.”

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

What the editorials said

“Obama’s good spirits are well grounded,” said The Economist. In a normal year, or even a normal recession, the loss of 250,000 jobs in one month would be devastating. But given that the economy was in free-fall when Obama took office, he’s right to take credit for pulling the country back from the brink. His most important actions were pumping massive amounts of public money into the failing financial system and subjecting faltering banks to stress tests. That put a stop to the collapse of institutions, credit, and public confidence—a downward spiral “that had threatened to turn a recession into a depression.”

Obama has no right to take credit for “the economy’s natural healing tendencies,” said The Wall Street Journal. If there’s a hero in this story it’s the Federal Reserve, which used traditional monetary policy to reinvigorate the credit and stock markets. “The $800 billion Obama spending stimulus has by definition been a bit player, since only a little more than 10 percent of it has even been spent.” Since the economy is bouncing back without the other 90 percent, taxpayers should reclaim it.

What the columnists said

The stimulus plan did work, said Paul Krugman in The New York Times. Federal spending—and the prospect of money in the pipeline—saved up to 1 million jobs. By ignoring conservative demands to let the free market punish financial firms and average people who made bad bets, the Obama administration prevented a rerun of the 1930s, when the government’s “hands-off attitude” toward economic collapse accelerated the Great Depression. “Ronald Reagan was wrong: Sometimes the private sector is the problem, and government is the solution.”

The full effect of the stimulus won’t be felt for a while yet, said Alan S. Binder in The Washington Post. And it won’t always be immediately obvious. “We won’t see photos of public servants not being fired.” But the continued influx of that $800 billion into our economy will provide the cushion we need as we slowly crawl out of this hole.

Let’s hold the champagne, said Bob Herbert in The New York Times. “You can put whatever kind of gloss you want on last week’s jobs numbers, but the truth is that while they may have been a bit better than most economists were expecting, they were still bad, bad, bad.” Nearly 7 million jobs have vanished since this recession began, and no one thinks the recovery that’s supposedly under way will bring them all back. Forget what the experts and politicians say. For workers, “the economic ship is still sinking.”

What next?

With President Obama’s poll numbers dropping over issues such as health care, energy, and deficits, he’s glad to have some good news as Washington shuts down for the rest of the summer, said Irwin M. Stelzer in The Weekly Standard. “The name of the game now is to trumpet the nascent economic recovery, and take credit for it.” Once he accomplishes that, he’ll quickly add that Americans “can trust him to be right on a host of other plans” as well.