Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

01 March 2012

We Really Are Still in Recession

In a recent post I noted that growth in the GDP was very anemic for a recovery period following a recession and actually for most any time.  I also noted that per capita GDP was not increasing unless the GDP grew faster than the population did.  I stated that taking this into account made the GDP growth we have seen look abysmal.  The situation is even worse than I then indicated.  I have found the graph of the real per capita GDP in an article by Tom Blumer entitled Slow 'Recovery,' Dire Consequences.  Tom Blumer points out that Warren Buffet noted in September 2010 that we were in a recession until real per capita GDP was back to its pre-recession level.  So, if you examine this chart you can see that we are still in recession and there is a number associated with the average pain.  Of course the real unemployment rate of above 14% should not be forgotten as well, since some people are in more pain than others.



The bottom of the recession was the 2nd Quarter of 2009 when the real per capita GDP was about $41,250, or about $2,768 less than the pre-recession real per capita GDP of $44,018.  In the 4th Quarter of 2011, we had recovered about 60% of the loss at the bottom of the recession.  We still have a long ways to go to be whole again.  Of course with a real unemployment rate of more than 14% and many people underemployed, it would be surprising if the real per capita GDP were not still depressed.

Tom Blumer also provides another set of useful numbers if we wish insight into why we are having such anemic growth.  In the 4th Quarter of 2007 before the recession hit the USA, but after much of the rest of the world was in recession (despite The Economist's 25 February issue re-iteration of the false claim that the USA started the worldwide recession), the total real GDP was $13.3260 trillion and all government expenditures were $2.4553 trillion, leaving only $10.8707 trillion for the private sector.  The corresponding numbers for the 4th Quarter of 2011 show the total real GDP to be $13.4224 trillion and all government to be $2.5076 trillion of that.  This left only $10.9148 trillion for the private sector.  So, the private sector real GDP grew a very anemic 0.41% over the course of four years or at an average rate of 0.10% per year.  The US population grew at a pace of about 0.97% a year from 2000 to 2010, so when expressed in per capita terms, the productive private sector GDP provides less per person in the growth of the economy.

There are many other reasons for concerns about the economy.  The rising costs of gasoline and diesel fuels will surely retard growth.  The even worse recession in Europe is a drag on exports.  The expiration of the 2011 100% write-off of capital goods expenditures to a 50% write-off in 2012, has resulted in a decrease of durable goods orders in January.  Orders were down by 4.0%, much more than most economists had predicted.  In fact, the very fact that so many of them were badly wrong is a reason for concern.  The only area of growth in durable goods was cars, trucks, and parts, so of course Obama has touted just that area in his speeches.  He has little to say about a general drop in transportation equipment orders of 6.1% with a particularly nasty drop in civilian aircraft orders.  Generally, business investment in equipment was down in January.  This does not bode well for business confidence or for further healthy increases in productivity.

3 comments:

Harry Dale Huffman said...

From the graph, and the fact that nothing will change to improve things for at least a year, the recession will last at least 2 more years. And as you noted, it is harder on many of us than the mere annoyance of losing $3,000 a year (in 2009) out of $44,000. It has meant losing life savings, homes, and work careers for millions--and that's just the immediate monetary loss, not the emotional devastation, which will have varied drastically with the individual.

Charles R. Anderson, Ph.D. said...

Yes Harry, the rise in the real per capita GDP has been glacially slow since the 2nd Quarter of 2010. The recovery is actually showing many a sign of stalling out. In Europe expectations of GDP decreases are rampant. China's growth is slowing. ObamaCare regulations and the act itself are already 3 times the length of the Bible and still growing. The Dodd-Frank Too-Big-Fail regulations are still growing. The EPA wants to further restrict fossil fuel use claiming CO2 is a pollutant, but is waiting until early in Obama's second term to proceed with that very expensive attack on the people and industry. When car prices skyrocket to meet the 54.5 mph requirement, what will happen to their sales? If recovery does come on, what will happen to gasoline prices as demand increases?

It would be much easier for the economy to improve is only we had a President who was not constantly attacking business owners and managers. A lot more rule of law would be useful also.

Harry Dale Huffman said...

I agree completely.