Academic journal article ABA Banking Journal

Recession Is over, but Doesn't Feel like It

Academic journal article ABA Banking Journal

Recession Is over, but Doesn't Feel like It

Article excerpt

The U.S. economic recovery appears to have entered a moderation phase, where growth is likely to remain positive in the near term but may not be as strong as was hoped for a few months ago. It seems clear that consumer and business psychology will play important roles in the near term.

The recession likely ended in June 2009. That simply signals that the overall economy stopped contracting and started to expand again. To many people, it will still seem like a recession for some time. Growth was positive in the second half of last year, but the recovery made an important transition in 2010. That is, growth in the second half of last year and early 2010 was supported largely by the federal fiscal stimulus and a shift in inventories (from a sharp decline to a moderate accumulation). Growth in the first half of 2010 saw less support from these transitory factors and more support from basic demand--consumer spending and business fixed investment. More importantly, the return of private-sector job growth indicates that the recovery has become more sustainable. Still, the economy recovers from recessions in fits and starts across time and sectors.

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One of the biggest fears during the economic downturn was that consumers might increase their savings dramatically. Declining stock prices and home values could lead consumers to sock more away for their retirements (see chart). …

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