Recessions & unemployment

I enjoyed the irony from today's AP.

"The unemployment rate has surpassed 10 percent for the first time since 1983 — and is likely to go higher. Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended."

Apparently ended? How do those newly unemployed people feel about the apparent end of the worst recession since the Great Depression? Is it even the worst recession since the Great Depression?

One of the rule-of-thumb definitions of a recession is two consecutive down quarters of GDP; by that definition the current recession started in the fourth quarter of 2007 which is not in dispute. If you assume that a recession ends after two consecutive up quarters of GDP, as AP apparently does, then we are "out of the woods" so to speak because the first, second and third quarters of this year saw changes in GDP of -6.4%, -0.7% and +3.5%, respectively; the last two quarters are "up".

While 3.5% is historically strong and -0.7% is a big shift in the right direction from -6.4%, it is driven primarily by private investment, namely residential investment which grew at 23.4% in the third quarter of 2009. This is probably due to a large number of people buying homes that were overpriced for years and the first time homebuyers tax credit. As the price of anything falls, more of it is purchased. However, this same residential investment figure had been negative (an average of -20%!) from the first quarter of 2006 through the second quarter of 2009. Wouldn't it be good to see a few more consecutive up, if not positive, quarters of residential investment specifically, private investment generally, private consumption and overall GDP before we conclude that the recession is over? (Government investment and consumption also factors into GDP, but what it invests and consumes must first be taken from the private sector.)

Also, if this is the worst recession since the Great Depression, then what was the 1983 recession? In 1983, unemployment was just as high and reached even higher (10.8%) before trending back, and inflation and interest rates were much higher then too (10.3% & 21.5%). Shouldn't we wait for numbers similar to or higher than these before we say that this recession was the worst? Well, since it's apparently over now, I guess it was not the worst recession.

Furthermore, "Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. President Barack Obama is expected to quickly sign the [$24 billion]legislation."

Do these people realize that this is essentially a loan...and a buyoff? They probably do not know or don't care, but I bet Congress does. This President and Congress have already spent $1.4 trillion more this year alone than has been taken into the treasury. Since they don't have the money now, it must be borrowed or printed. Who has to pay back this loan or deal with the inflation down the road? The same people getting the "benefits" and their children will pay it back. Congress also has to keep the electorate happy at least until next November.

If the recession is over and unemployment remains high, then is this not a jobless recovery similar to the one over which Bush presided in his first term? Hiring usually lags behind GDP growth and that played out after the last recession. Will a similar recovery occur now?