Here's Warren Buffett yesterday at his second home on CNBC:
I think we're in a recession until real per capita GDP gets back up to where it was before. That is not the way the National Bureau of Economic Research measures it. But I will tell you that to any, on any common sense definition, the average American is below where he was before, or his family, in terms of real income, GDP. We're still in a recession. And, and we're not gonna be out of it for awhile, but we will get out of it.
Fair enough. Here's where that puts us:
Source: Federal Reserve, author's calculations.
So we need just over 3% growth to get back to where we were. How difficult is that? Since the bottom in early 2009, real GDP per capita has grown 2.11%. By Buffett's metric, then, we're maybe one-third of the way out of the woods.
I like this metric, although I'm not sure it's very meaningful to most people. Just as NBER calling the end to the recession meant exactly nothing to anyone unemployed or about to lose their home, per-capita GDP can increase while millions of individuals hardly notice. I think a more meaningful number is unemployment. Until unemployment falls to where it was before the recession started, it's going to feel like hell for a lot of people. How long until we're back to those glorious days? The Organization for Economic Cooperation and Development says it won't happen until 2013, which seems like a reasonable estimate.
What's interesting is that legions of companies have already made it back to where they were before the recession started. Fully 48% of S&P 500 companies earned more over the past 12 months than they did in 2007, with a median gain of 33%. It isn't hard to find companies whose share prices are now at all-time highs, including McDonald's
And good for them. But for most of us, as Buffett says, "we're not gonna be out of it for awhile, but we will get out of it."