Double dip recession is a myth

[disneysteve]

Did anyone see the essay in TIME magazine explaining why the whole concept of a double dip recession is meaningless? Basically, the author said that folks who were hard hit by the recession have not seen any recovery yet, so there is no "double dip" for them. It has just been one continuous dip. And for the folks who weren't really affected by the recession, they haven't seen any dips, first or second. Makes sense when you think about it.

My family and I have been fortunate to be in the latter group that wasn't particularly impacted by the recession. We both still have our jobs. Our investments took a hit but have pretty much recovered. We have no debt except our mortgage and we can comfortably afford that. So the whole recession/recovery/recession is just business as usual in our house, just as this author describes.

One very interesting fact in the article is that despite the fact that we keep hearing about a 10% unemployment rate, it really depends on where you look. The rate among those with a college education is just 4.4% and among woman with a degree it is even less than that.

[ez1]

No doubt that the way a recession feels is a much more localized event than what the macro view conveys. Much like saying that the global temperature going up 0.5 degrees doesn't really matter to anyone whose city experienced a 0.25 degree drop on average. But there is no question that if the macro changes in the economy are magnified sufficiently, it will be felt by all. No matter whether you call it a "double dip" recession, if it's very deep and painful, it will affect everyone. But their point is well taken.

[am_vanquish]

DW and I were talking about this recently. We're up in the air on whether or not the recent spike in the popularity of frugality and living beneath your means will continue after the "recovery." She suggested it might be a good thing to have a double-dip (even if it doesn't feel like it), just so the media can keep the economic downturn in the news and continue to scare people into saving their money like they're supposed to anyway.

[bjl584]

Steve,
I'm like you in that I'm in the latter group. I still have my job, my investments took a hit, but have recovered. I didn't really "feel" the impact of this recession. However, I live below my means, save almost 28% of my income, have an EF, and my only debts are mortgage and student loans which are more than manageable for me. I credit my lifestyle to the fact that this recession hasn't impacted me in any significant way.

I could easily see how someone living paycheck to paycheck who doesn't have savings or a budget would be completely devestated by ab economic downturn. I know several people personally who couldn't pay their bills as soon as their employer cut out overtime when the economy slowed.

[maat55]

I'm in between, throughout this recession, I have had slow periods and busy periods, but all-in-all, I've been much slower than normal.

It is not stopping me from increasing my wealth or paying my bills, it is just an inconvience. Where the double dip may occur is in stocks.

[Broken Arrow]

Huh, I guess I was reading too much into the title of the article, because I was thinking of the NBER's way of defining a recession, which you guys know it typically involves 2 consecutive quarters of losses in GDP (or something along those lines).

The article appears to be stating more along the lines of individual experiences in this recession? If so, I can agree with that, though the title does seem a little bit misleading to me.

[disneysteve]

Sorry for the title. It wasn't really what I meant to convey. I was mainly relaying the point that the macro definition really doesn't match the personal experience. It isn't as if everyone was doing well, then hit a downturn, then started doing well again and then hit another downturn, as the "double dip" would suggest. In reality, it is much more likely that either people hit a downturn and have yet to recover from it or they never really hit a downturn and have continued to do reasonably well throughout this time period. The double dip thing is more on paper than in practice.

ETA: I changed the title.

[EconoMutt]

I think we're in for slow growth for an extended period of time.
It will feel like a recession to many people, but technically we will have growth.

[mmgarren@yahoo.com]

I believe we are in for tougher times ahead. It takes time for excesses to be wrung out of the system. Since most of us are frugal whether times get worse or better we have done everything to help ourselves. Good financial habits are a blessing in good times or bad.

[EconoMutt]

Originally Posted by mmgarren@yahoo.com

I believe we are in for tougher times ahead. It takes time for excesses to be wrung out of the system. Since most of us are frugal whether times get worse or better we have done everything to help ourselves. Good financial habits are a blessing in good times or bad.

It's definitely a bad time to be in debt up to your eyeballs.
Unfortunately, that's where most people are.

[disneysteve]

I've seen a few reports illustrating that spending is on the rise again. It isn't back to pre-recession levels but the temporary frugality is fading away.

[snshijuptr]

Well it feels like a double dip recession for teachers because since no one was hired last year, seniority remains the same and the exact same people were RIFed (lreduction in force) again. So basically you get fired, rehired or find a new job, then fired again. You don't get any higher on the food chain because so few new teachers were hired. This is significant because education is the largest sector of employment in the US.

[disneysteve]

Originally Posted by snshijuptr

Well it feels like a double dip recession for teachers because since no one was hired last year, seniority remains the same and the exact same people were RIFed (lreduction in force) again. So basically you get fired, rehired or find a new job, then fired again.

Interesting. Sounds like one example of the double dip actually playing out on a personal level. Why would they rehire and then refire the same people? Is it because of budget cuts that occurred after they were rehired?

[snshijuptr]

Union laws state that everyone must be notified by March, but the budget finishes in May and the job ends June 30. So some people are rehired that way. In addition with federal and state jobs bills, more jobs are added. So they go through and have to hire back based on seniority. Finally, people are fired, not the positions lost. So as the school year starts, principals still need # of history teachers so they go through the pool, starting at highest seniority and offer everyone the position.

The problem is that if you express seniority in number of years served, there is no one with 1 year. No one got hired last year (overstatement). So since it is all relative, teachers who now have 2 years are basically going through their 1st year all over again.

[bjl584]

Originally Posted by disneysteve

I've seen a few reports illustrating that spending is on the rise again. It isn't back to pre-recession levels but the temporary frugality is fading away.

I remember the first news broadcast that I saw reporting on how America suddenly discovered frugality. People were cutting back, using less, buying on sale, saving money, etc. I knew it wouldn't last forever. People will revert back to the way that they are in most cases. Frugality almost became a kind of fad for awhile there. Fads don't stick around long.

[disneysteve]

I think most will revert back but there will be some who have "seen the light" and will stick with it, which is great. Some people have had the realization finally that there is another way to live and that it is possible to enjoy life without spending every penny that you earn and then some so I don't think it is all bad.

[bjl584]

Originally Posted by disneysteve

I think most will revert back but there will be some who have "seen the light" and will stick with it, which is great. Some people have had the realization finally that there is another way to live and that it is possible to enjoy life without spending every penny that you earn and then some so I don't think it is all bad.

True. I guess if even one out of ten decide to continue a frugal lifestyle, progress has been made.

[am_vanquish]

Originally Posted by bjl584

I remember the first news broadcast that I saw reporting on how America suddenly discovered frugality. People were cutting back, using less, buying on sale, saving money, etc. I knew it wouldn't last forever. People will revert back to the way that they are in most cases. Frugality almost became a kind of fad for awhile there. Fads don't stick around long.

This was my wife's comment. If the economy hits the technical definition of a double-dip, it will extend the "fad" of being frugal because news organizations will continue to talk about the economy. Hopefully that will get a few more people to stick with frugality.

If the economy recovers, people will stop talking about it altogether and spending will return to regular levels (out of sight, out of mind).

Also, I think this is another example of the disparity between Main St and Wall St. Much like today's jobs report does not seem consistent with the earnings reports that were released recently for publicly traded companies.

[disneysteve]

Originally Posted by am_vanquish

Much like today's jobs report does not seem consistent with the earnings reports that were released recently for publicly traded companies.

There really isn't much correlation between the unemployment rate and corporate earnings. If anything, it is a negative correlation. Higher unemployment means higher earnings. If a company is able to maintain productivity with a smaller workforce, they reduce operating costs and increase their profit margin.

[EconoMutt]

Originally Posted by bjl584

I remember the first news broadcast that I saw reporting on how America suddenly discovered frugality. People were cutting back, using less, buying on sale, saving money, etc. I knew it wouldn't last forever. People will revert back to the way that they are in most cases. Frugality almost became a kind of fad for awhile there. Fads don't stick around long.

Yes, How America suddenly discovered frugality.
It's called going to the bank and getting turned down for a loan for the first time in their lives. ;-)