Q: What is a recession?
A: When you talk about a business cycle, you have a downturn and an upturn. The downturn is the recession and the upturn is the recovery. Once you hit the bottom and start to come up, you’re in recovery, but you certainly haven’t gotten back to where you were before. Even a year and a half later, 2 years later, we’re not back to where we were in 2007. So, although we’re technically in a recovery, we certainly haven’t recovered back to where we were before. The downturn, the bottom, we’ve passed the bottom – but nowhere close to where we were.
Q: Are you seeing signs of recovery in Idaho?
A: Employment has leveled off and has started to increase. Home sales have stopped going down as fast as they were and have leveled off – in some places they’re starting to increase. Housing prices aren’t falling as fast as they used to. Auto sales are up from a year ago – they’re still half of what they were 3 or 4 years ago. So yes, we see signs of recovery.
Q: Do those indicators matter to the person who still doesn’t have a job?
A: Yes, it means it’s not quite as risky as it was before. If we were still in a recession, if things were still going down, it’d be much worse. Two years ago if you got laid off chances are you’d be laid off for 6-12 months, now you won’t be able to find work for 5-9 months. It’s still tough, but not quite as bad.
Q: Does the word recession matter?
A: When we talk about the Great Depression – it lasted from 1929 to 1941 – but technically, from the point of view of the economist, the Depression only lasted from 1929-1933, from ’33 on we were into recovery. But things were so poor for that 10 to 12 year period, that we called it the recession even though we were in a recovery for most of that. We’re in a recession. In the popular use of the term, we’re still in recession, even though the economy isn’t in decline – we’re still in recession, we’re not back to where we were before.
Q: There’s a lot of talk about slipping into a double-dip recession. Would it be easy for Idaho to slip into a double-dip, given the fragility of the economy?
A: If you’re going to track the economy, you want to track spending, and the reason that we’re not coming out of the recession very fast is because spending isn’t recovering very fast; household spending, business spending, government spending, and foreign spending. And right now, because of the decline in housing prices and the decline in the stock market, (U.S.) households lost about $16 trillion in net worth and they aren’t going to start spending until they feel comfortable – until they get that net worth back. So, you have to recover the net worth or feel like it’s recovering, feel secure in their jobs – or if they lost it, feel comfortable that they’ll find a new one in a few weeks rather than a few months or years. And when that happens, then they’ll spend money and they’ll be spending enough money to spur production and spur employment.
Q: How do you turn around that confidence on the state level?
A: Homeowners thought they were living in a $400,000 home and now they’re living in a $200,000 home – they lose their job and instead of being out of work for 3-6 weeks they’re out for over half a year. Consequently, in that kind of an economic environment they aren’t going on vacation, buying cars, there are a lot of things they aren’t doing. It’s the wise thing to do. At the state level – every state is such an integral part of the national economy, there’s not much you can do at the state level, unless you discover oil or something miraculous happens. We’re in for a long one – this will be a defining moment. Your kids will look back and think ‘how did Mom and Dad will deal with this one?’