This recession was a bad one. Probably the worst I can remember. Everyone I know, including myself, was affected by it in some way. I know people who lost their jobs (like me, for instance) due to the economy, had their pay cut or had to adjust their life in some way to accommodate economic hardship.
I say “was” as though the recession is over. The recession is not over. When you have over 10 percent unemployment, then you still have a nasty recession going on. But Wall Street seems confident that we are on the way back up, as the Dow has pushed above 10,000 points for the first time in over a year. That is good news. That means that investors feel confident enough to invest in American businesses again. But that is just the beginning.
There are two things that need to be turned around before this recession can be considered truly over. The first is unemployment. The stock market can rebound to 15,000 points, but if companies are not using that money to hire people then it does not do the economy any good.
I don’t blame the companies. After years of financial instability, they are going to hold on to any extra money they get for as long as they can. If they see some consumer confidence this holiday shopping season, then they may start to open up the spending and hiring a little bit in January. But the process of stabilizing the economy enough so that companies feel confident enough to hire people back takes a long time. Years. But it has to start somewhere. So spend what you can this holiday season and give businesses a reason to invest in new projects next year. Who knows, you may get a job out of it.
The other thing that needs to right itself is property values. Prior to the bubble bursting on the mortgage market, the value of property in the United States was artificially inflated. When the bubble burst, those property values fell way below where they should be. Suddenly people were either getting foreclosed on or their mortgage was under water. A mortgage under water means the house is worth less than the mortgage, and that is not good.
So anyone who had equity in their home before the recession hit probably lost that equity. That means no home equity loans or home equity lines of credit, and that means Junior doesn’t go to college and the house does not get a new roof. Now the college has one less student to pay tuition and there is one less roofing job for contractors to bid on. You get the idea.
Every economic downward spiral has a bottom. Luckily for us, the bottom of this one only took two years to get to and not four or five years. For every year we are in a recession, it takes about three years to recover. No scientific data here, it is just something I have noticed throughout my adult life. So this two-year economic freefall will take us about six years to recover from. But we will recover.
What needs to happen now is consumer confidence needs to start going up. That means that those of us with spending money need to spend it. That is why you are seeing Christmas commercials on television now instead of later in the month. Retailers, manufacturers and shipping companies want you to understand how important this Christmas shopping season is to everyone.
If manufacturers see sales go up, then they make more product, which means they ship more product and the retailers can sell more product. It is a painfully slow process, but the sooner we start it, the sooner we can start looking forward to climbing out of this financial hole we are in.
So open up the wallets this year, folks, and spend for the good of the economy. There is only so much government and big business can do to pull us out of a recession. At some point, the ball gets handed to us and we need to decide if we are going to run with it, or keep it tucked under our arm and hold on to it a little while longer.
George N. Root III is a resident of Lockport and his column is published every Wednesday. He can be reached at georgeroot@verizon.net.
