The Great Recession Is Over (On Average)

The Great Recession began in December 2007. That's when the official scorekeepers at the National Bureau of Economic Research said it began, anyway.

It "officially" ended in June 2009, but everyone knew that was more technicality than substance. The economy stopped plunging around that time, but it wasn't within hailing distance of regaining the ground lost during the financial crisis.

But by one measure, it's really now over.

As of the second quarter, real GDP per capita -- how much the economy produces per person, adjusted for inflation -- is back at an all-time high:

Source: Bureau of Economic Analysis.

In simple terms, the country is now the richest it has ever been. Ever. In history.

The Great Recession is over.

On average, at least.

Real GDP per capita shows how rich the country is per average person. But the country isn't made up of average people. It's made up of a small group that is doing very well, and a very large group is that is still struggling. It's a split economy.

Here's a good example. On Sept. 13, 2012, two news headlines read, "U.S. median income lowest since 1995, " and "Ferrari sales surge to record highs." That's the split economy.

We've always had a split economy, but by some measures inequality increased during the Great Recession.

Take this table, showing changes in household net worths by income percentile over the past decade:

Source: Federal Reserve Survey of Consumer Finances.

Adjusted for inflation, the median net worths of households in the 90-100 income percentiles increased from 2001 to 2010 -- not by a lot, but there was growth. But for the bottom 90%, real median net worths declined.

The spread between top and bottom income groups has probably grown wider since 2010, since the Dow Jones (DJINDICES: ^DJI  ) has surged more than 50% and upper-earning households own a disproportionate share of stock assets:

Source: Levy Institute. 

I've interviewed two dozen economists over the past two years, and I ask every one the same question: How long do you think it will be before the median American is doing better than ever? The most common response I've received is literally laughter. Maybe that's a contrarian indicator -- it always looks the worst when things are about to turn. And there are signs things could change. But the America-is-doing-great-while-most-Americans-aren't theme is powerful right now. It's bittersweet in every way.

If you want to learn more about the economy, check out my report, "Everything You Need to Know About the National Debt." It walks you through with step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. Click here to read the full report!


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  • Report this Comment On August 19, 2013, at 11:39 AM, SkepikI wrote:

    <We've always had a split economy, but by some measures inequality increased during the Great Recession.>

    Which is exactly what one would expect from a very deep and L-o-n-g recession. Those with few resorces to begin with and small savings, or none, no emergency fund are forced to hunker down and cannot invest at the bottom. Only those with reserves who have weathered the storm can, and even then most are reluctant. The very few with high liquidity, more than survival resources AND the fortitude invest and reap outsize rewards.

    While this is an interesting piece, Morgan, I dont see that you went far enough with your logic. But, perhaps I can credit you with making your readers think for themselves....

    One minor nit on an otherwise good but too brief article: Can we really depend on GDP as a measure of wealth across the recession? Was it really at least internally consistent?- That is did it measure the same thing approximately beginning to end? OR did it get tinkered with mid recession as I have seen suggested elsewhere?

    Is GDP really good for anything? Now there's an article really worthy of your talents. Dissecting GDP, how its really created and its flaws...

  • Report this Comment On August 19, 2013, at 11:56 AM, slpmn wrote:

    Every time I see something showing the median net worth of American families I get depressed. "The Wealthiest Nation on the Planet" and the median family's net worth is $77,000? People in the 80-90th percentile in terms of income have median family net worth of $287,000? You're talking the top 20% of earners and they're nowhere near close to having enough saved to fund a comfortable retirement! And if net worth includes the house, wow, are they in trouble.

  • Report this Comment On August 19, 2013, at 5:58 PM, xetn wrote:

    All of the above plus millions of workers with part-time jobs, huge debt, and Fed now monetizing most of the Federal debt. (China and Japan have been liquidating their US debt holding at record pace.)

    Net present value of unfunded liabilities of 220 Trillion.

    Based on this article, we really can spend and borrow our way to wealth. In a pigs eye.

  • Report this Comment On August 19, 2013, at 6:00 PM, xetn wrote:

    Oh yeah, I forgot the roughly 49% of residence receiving what used to be called food stamps and huge number of workers on unemployment compensation.

  • Report this Comment On August 19, 2013, at 6:13 PM, sevenheart wrote:

    Honestly now Morgan. Didn't the way our GDP get measured just change? Just like the way we measure inflation? Unemployment? Shadow stats shows the combined U3 and U6 unemployment rate as measured by 1994 methods is 25% and growing. Try to buy a 5 lb bag of sugar, you can get 4 lbs for the same price and "we have no inflation".

    Now GDP includes all kinds of things it never has counted in the past. Yes sir, things are getting much better, let me just put some paint on that and move this over here and pay no attention to the economist behind the curtain!

    Figures don't lie, but liars can figure.

  • Report this Comment On August 19, 2013, at 6:23 PM, stevews99 wrote:

    The unsaid addition to this Obama fanboy article: All we need is a little income redistribution. The path to prosperity for ALL Americans is a growing, vibrant economy powered by private investment. Exorbitant spending by the government has never worked and did not work (again). Now why can't Morgan write an article about that?

  • Report this Comment On August 19, 2013, at 6:36 PM, TMFHousel wrote:

    <<Didn't the way our GDP get measured just change? >>

    The changes were made to all years going back to the 1920s. It has no impact on comparisons.

    <<Try to buy a 5 lb bag of sugar, you can get 4 lbs for the same price and "we have no inflation">>

    BLS adjusts for quantities.

    <<Now GDP includes all kinds of things it never has counted in the past. >>

    That's because all kinds of things now exist that didn't in the past.

    <<Figures don't lie, but liars can figure.>>

    More often, people aren't very good with statistics.

  • Report this Comment On August 19, 2013, at 6:43 PM, TMFHousel wrote:

    <<Shadow stats shows the combined U3 and U6 unemployment rate as measured by 1994 methods is 25% and growing. >>

    Three things:

    1) Why would you combine U3 and U6? That's literally the definition of double counting.

    2) ShadowStats doesn't use BLS's old methods. No one can use BLS's old methods because nobody has BLS's old models except BLS. ShadowStats takes the BLS's current figures and adds an arbitrary constant. Its founder John Williams has admitted as much:

    "I’m not going back and recalculating the CPI. All I’m doing is going back to the government’s estimates of what the effect would be and using that as an ad factor to the reported statistics.”"

    http://azizonomics.com/2013/06/01/the-trouble-with-shadowsta...

    3) Why do you assume 1994's statistical methods are more accurate than today's?

  • Report this Comment On August 19, 2013, at 7:02 PM, xetn wrote:

    Morgan:

    Why do you assume today's methods are more accurate than 1994?

    It seems to me that every year the BLS changes the measurement methodology. I don't believe it is to make things more accurate, but to make things look better.

    In the meantime, the government keeps looking for more and better ways to extract wealth from the producer group to transfer to the tax consumers.

  • Report this Comment On August 19, 2013, at 7:32 PM, gkirkmf wrote:

    Seems to me Morgan that there should be two CPI's ... one for the 1%, and one for the rest... the basket of goods and the proportion of these goods is certainly different... maybe that is where the problem with the CPI lies.

  • Report this Comment On August 19, 2013, at 7:49 PM, DJDynamicNC wrote:

    From xetn: "Oh yeah, I forgot the roughly 49% of residence receiving what used to be called food stamps and huge number of workers on unemployment compensation"

    Meanwhile, back in the actual United States that actual people actually live in:

    "As of September 2012, 47.7 million Americans were receiving on average $134.29 per month in food assistance. More than 15% of the U.S. population receive food assistance."

    http://www.fns.usda.gov/pd/34snapmonthly.htm and http://blogs.wsj.com/economics/2013/08/09/food-stamp-use-ris...

    Would you be ok with simply giving $134.29 in food stamps to EVERY American, so that it's fair? Much easier to administer too, without having to analyze and means test, so you could shrink government.

  • Report this Comment On August 19, 2013, at 7:57 PM, TMFHousel wrote:

    <<huge number of workers on unemployment compensation">>

    We can debate what "huge" is, but since 1980 the average level of Americans receiving unemployment insurance is 2.9692 million. In July it was 2.9690 million. Below average, in other words.

    http://research.stlouisfed.org/fred2/series/CCSA

    <<Why do you assume today's methods are more accurate than 1994?>>

    Because adding computers to the CPI during a period when people were buying computers passes the logical sniff test.

  • Report this Comment On August 19, 2013, at 9:00 PM, kyleleeh wrote:

    << Exorbitant spending by the government has never worked and did not work (again). Now why can't Morgan write an article about that?>>

    Every industrial nation on earth pulled it self out of the great depression through massive government spending to gear up for WW2. We racked up the largest debt to GDP ratio in our history and the end result was the longest period of prosparity we have ever known.

  • Report this Comment On August 20, 2013, at 11:07 AM, SkepikI wrote:

    <3) Why do you assume 1994's statistical methods are more accurate than today's?>

    Morgan- why do you assume ANY of the statistical methods, today's, yesterdays, 1994's 2001 are accurate at all? One great thing you could do for your readers if not yourself is to actually drill down into the methodology and the reliability if not the internal consistency of GDP, CPI and other measures you use as the basis for conclusions.

    I don't really "know" any more than to be suspicious. My family was selected for a 3 year survey group by BLS for the CPI back in 1997. I was APPALLED at the lack of serious data they relied on. We kept better than average records of purchases and the surveyor remarked on that. When I asked him what OTHER people did, he rather uncomfortably said "Well most just guess" and that's an exact quote, I will never forget it.

    I could bore you by expounding on statistics and the need for the integrity of underlying data, but I don't think I need to.

  • Report this Comment On August 23, 2013, at 5:29 PM, cmalek wrote:

    As Mark Twain said "There are three kinds of lies - lies, damned lies and STATISTICS"

  • Report this Comment On August 24, 2013, at 3:03 AM, ChrisBern wrote:

    The Great Recession would be back tomorrow if the Fed announced it was going to stop buying bonds. Literally, within a quarter the country would be in recession. So the recovery is real in one sense (the data) but false in another (it was created by government intervention that once withdrawn will sow the seeds of our next recession).

  • Report this Comment On August 24, 2013, at 3:06 AM, ChrisBern wrote:

    Oh I should add, the same goes for Europe. The only thing saving them in the short run is the ECB backstopping several countries' bonds. This eventually won't end well but it gets politicians off the hook in the short run, which is most important right?

  • Report this Comment On August 25, 2013, at 2:18 PM, esotericevets wrote:

    Families are similar to corporations. Some have characteristics that allow for dynamic response to changing conditions and others don't. "Even a blind squirrel will occasionally get a nut" comes to mind when you hear of a down and out for the count family that gets a sudden windfall. Perhaps it behooves the families of the world to muster their resources a little more wisely and exhibit a forest full of gumption (what movie comes to mind?) and work their collective way up from the median to the mean. And while doing so, do their best to sidestep the world wide military industrial legal penal security complex.

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