20 months of Recession (December 2007 to Present)

List of Recessions in U.S. History

The United States is now in its 20th month of recession. According to statistics provided by the National Bureau of Economic Research, this is the longest contraction of our economy since the Great Depression. The Great Depression lasted for 43 months, from August 1929 until March 1933 most believe. This was followed by a period of slow, but gradual recovery until 1937, when the United states went into recession again. The 1937 recession is considered to have lasted for 13 months between May 1937 and June 1938. The recovery between 1933 and 1937 did not result in lowered unemployment and thus many people still considered it to be a period of malaise. The 1937 recession lasted for 13 months, but when considering these two contractions together, one could say that the contractionary period was actually 94 months.

By 1936, all the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high, although it was considerably lower than the 25% unemployment rate seen in 1933. In 1937, the American economy took an unexpected downturn, lasting through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. In two months, unemployment rose from 5 million to over 9 million, reaching almost 12 million in early 1938. Manufacturing output fell off by 40% from the 1937 peak; it was back to 1934 levels.

Unemployment was considered to be improving, when it was 14.3% in 1937. It had fallen from 25% to that level. We haven't seen those terrible numbers yet, but are they on the horizon? The depression numbers seem to point to a correlation between manufacturing and unemployment. That is a lot like what we have seen in our local area.

The next longest recession, during modern times, was from July 1981 to November 1982. That recession, during Reagan's first term, lasted for 16 months. It had been preceded by a 2 quarter recession from January 1980 until July 1980. If one looks at these recessions in the proper context, they were basically one recession that began with Carter in January 1980 and lasted 34 months.

The Hounds believes that we are going to see a period of time where we see a muted recovery as we saw in the two recessions shown above and then we are going to head right back into a contraction that will be worse than what we are seeing now.

I am not saying that we are seeing the end of the first part of this cycle, but I do believe the recent stock market recovery to 9,000 indicates that this muted recovery is on the horizon. I believe the dynamics are being fostered by the moderation of the rise in fuel costs we have seen the last few months, the increase in the money supply and capital of financial institutions, the possibility that Obama may be stopped from implementing some of his agenda, and most of all the length of time we have been in this contraction (recession). But, our energy prices are precarious with all of the international issues and hurricane season on the way. We are still very vulnerable on that issue.

In Finance, there is a term called a Dead Cat Bounce. It involves commodities, such as stocks, but I believe that it also can relate to any type of economic activity. With the Dead Cat Bounce, a pattern develops where the commodity declines substantially followed by a moderate and temporary rise in value, before the commodity resumes its downward movement. This rise is not an indication of improving circumstances in the fundamentals of the commodity. The saying goes "even a dead cat will bounce if it falls from a great height."

Yes, we will eventually see improvement from the contraction, but it is going to be really hard to tell what is real and what isn't. Don't be so sure that we aren't seeing a lot of Pump and Dump activities going on with the stock market. The fundamentals just aren't there to justify a recovery, but people are grasping at anything to find something they believe will justify an economic recovery. Right now, there are two types of investors in this market, those who crave an economic recovery so they can start making money again and those who are looking to hype their positions so that they can sell them, because they are looking to salvage as much money as they can from the losses they have incurred.

I believe a double dip recession is inevitable, because you cannot have a real, sustainable economic recovery without a significant improvement in the job picture. We have real problems with our country's ability to grow jobs. The other issue is that of inflation. With as much money as we have seen put in the system, as soon as any signs of economic recovery come along, you are going to see a rise in commodity prices. That starts the cycle over again.

Until we find something to produce and the government gets off of the backs of job creators, it is going to be impossible to have a lasting and worthwhile recovery. Our leaders, in every level of government, are going to have to take some chances along the way, because we have fundamentally changed the economic structure of our nation. We cannot sit around and wait for the picture to improve. We are going to have to take proactive stances and government officials are going to have to find the inner strength needed to rediscover their roots as public servants.

If our government were a company, would you say it was well run? If you had a nest egg for retirement, would you let our current government take care of it? It is time that people start expecting our government to be run like a business. The government has a fiduciary responsibility to look out for everyones interests. Whether the government invests in a project or institutes a program, it is time to set some goals, assess the risks, implement the tasks in an efficient manner, and take care of the shareholders of the United States Treasury; which is supposed to be the Citizens of the United States.