Economic Indicators

12 May

I am often asked, “When is the economy going to recover?”  If you believe an October 2009 survey of 44 professional economic forecasters by the National Association for Business Economics, the recession ended in June 2009.  If you follow Paul Krugman, the Nobel Prize winning economist, we are still in a depression (albeit not as severe as the Great Depression).

In April, the growth forecast (GDP) for 2012 moved up to a range of 2.4% and 2.9%, higher than the 2.2% to 2.7% predicted during the last round of projections in January.  Alternatively, the inflation forecast rose to a range of 1.9% to 2.0%, higher than the 1.4% to 1.8% projected in January.  Unemployment at the end of the year is expected to be around 7.8% to 8.0%, down (yet still high) from an earlier projection of 8.2% to 8.5%.

Subsequently, the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System charged under United States law with overseeing the nation’s open market operations (that is the buying and selling of United States Treasury securities), opted to keep interest rates (and therefore the money supply) unchanged.

So what would an economic recovery look like?  To what level should the economy recover – to pre-recession levels?  To levels achieved before the run up in housing prices?  Or somewhere in between?  While I have found myself responding to such inquires with a very lawyerly “It depends,” the real answer is more honestly, “I don’t know.”

I started the postCynical blog as a means to educate – myself, my friends and my family – in order to make more informed financial and economic decisions.  To that end, I will be dedicating this summer to examining key economic indicators (what they are, what they measure, and why they are important) and how they relate to (or don’t) to the economic health of the nation and the financial decisions we make every day.

Despite assurances that the recession ended in June 2009, I believe we are a long way from recovery. It took nearly 40 years to wind-up the global economy to the levels of wealth, debt and systemic risk that we are now trying to address.  I believe it will be 7 to 8 more years (if we do the right things now) before we see significant recovery and stability.  Let’s explore and examine.

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