The Recovery Is Real

By Gross, Daniel | Newsweek, June 14, 2010 | Go to article overview
Save to active project

The Recovery Is Real


Gross, Daniel, Newsweek


Byline: Daniel Gross

Why fears of a second recession are overblown.

In the past month, several unfortunate phrases have joined the lexicon, including "top kill," "Gore divorce," and "double-dip recession." On the Today show on May 21, CNBC's volatile James Cramer increased his odds of the economy's suffering a relapse from 25 percent to 35 percent. At a mid-May investment conference, Robert Arnott, chairman of money manager Research Affiliates, predicted that "there's a better than 50 percent chance that we will see a second dip in the economy." Google searches for "double-dip recession" have spiked.

And why not? GDP grew at a 3apercent rate in the first quarter, down sharply from 5.6 percent in the fourth quarter of 2009. The Conference Board Leading Economic Index (LEI) fell in April by 0.1 percent, the first downturn since March 2009. The debt crisis that began in Athens is threatening to tear the euro zone asunder. (Beware of Greeks bearing rifts!)

But if you want a double dip this summer, you'll have to go to Carvel. "The scenario in which there is a double dip is fairly remote," says Joel Prakken, managing director and cofounder of Macroeconomic Advisers, the St. Louis-based consulting firm. "I just can't really see it happening unless there is an extreme crisis of confidence."

To a degree, the crisis of confidence that began in the summer of 2008 never really ended. And that accounts for a chunk of the concern over a double dip. Our muscle memory impels us to extrapolate a few bad data points into a debacle. Think of how the meaning of an engine backfiring in lower Manhattan changed after September 11. Every time we see a punk housing number, a European government wobbling, or a sickening 1,000-point flash crash, our minds fly back to September 2008--and we imagine the worst.

The tapering off of GDP growth is natural as recoveries mature. We live in an age of long expansions--the past two have lasted 120 and 92 months, respectively. But a chart showing quarterly GDP growth presents a saw-tooth pattern. The business cycle proceeds less like a professional runner tackling the New York City Marathon who ticks off each mile at a steady six-minute pace, and more like your author, who tore through the first half at a seven-minute pace, bonked in the Bronx, and rallied toward the finish line.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

The Recovery Is Real
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?