Is the Recession Receding?

The lead story in today’s New York Times is titled, “An Upbeat Fed Views Recession as Near an End.” The article describes a recent statement by the Federal Reserve noting progress on consumer spending and financial markets though employment is still lagging behind. As a result, the Fed has decided to end its emergency program of purchasing $300 billion in Treasury bonds in October.

The article goes on to note that the Treasury bond program is minor when compared to the amount being spent to purchase mortgage securities, $1.25 trillion, and that the housing market remains the prime area of concern. However, the economy only slowed by 1 percent in the second quarter of 2009 compared to 6.4 percent in the first.

In my opinion, these statistics and distinctions remain arcane to the average American who evaluates the economy primarily by the unemployment rate. And the article notes that the unemployment rate is expected to remain around nine percent through the end of 2010.

There seems to be something skewed in the Fed’s analysis. How can the economy respond when so many people are unemployed and thus don’t have any spare money to spend? And the lack of individual earnings also means a continuation of reduced tax revenues for states and the federal government.

Hopefully, the stimulus will start to kick in with more jobs because the current situation remains untenable. Cash for clunkers is a great program, but everyone is forced into some spending just by product obsolesence and the need to replace necessities. Let’s see what happens in the next few months before we declare “mission accomplished.”