|Perhaps more than any other single factor, economists say the difference between good times and bad is measured by the difference in the number of unemployed Americans -- but that's not the main measure of a recession.|
Perhaps more than any other single factor, economists say the difference between good times and bad is measured by the difference in the number of unemployed Americans now compared with before the recession began. "Many people are still out of work and haven't regained any kind of employment since the recession began, which is probably a big factor in why people are saying it still feels like we're in a recession," says Paul Dales, U.S. economist at Capital Economics in Toronto. At the moment, the unemployment rate is stuck at 9.1%, compared with 5% in December 2007 when the recession officially began. Dales says this fact highlights just how much growth is needed in the labor market before the country feels the bad economic times are over. Alternatively, federal policy analyst Andrew Fieldhouse suggests taking this metric one step further by looking at Bureau of Labor Statistics data on the employment-population ratio. The data shows that roughly 3% less of the population was employed in August of this year than at the start of the recession, and 6% less than at peak employment in the beginning of the 2000s. "This puts into context just how bad it's been and shows just how much ground really has to be made up between 5% and 9% unemployment," Fieldhouse says. Income levels
One of the major problems with measuring the health of the economy by how much it grows, economists say, is that this doesn't tell us which portions of the population are benefiting from that growth and which are getting left behind. Indeed, as Fieldhouse points out, the economy did grow in spurts in the late 2000s, but it was mostly higher-income earners who enjoyed that growth, not the country as whole. To paint a more accurate picture, the economists we spoke with suggest measuring the fiscal health of the country by looking at median wages or by breaking down the GDP by person to get a sense of how much each individual contributes to the economy on average and how it compares with previous years. Sure enough, when looking at each of these metrics, it's not hard to see why many Americans feel disillusioned with the state of the economy. A recent report from the U.S. Census Bureau found that median household income stood at $49,445 last year, a drop of 6% from the beginning of the recession and roughly on par with what Americans earned in 1996 with inflation factored in. Likewise, real GDP per capita was $46,884 last year, or about $500 less than it was in 2005. The economy may be growing, but as these numbers show, Americans are stuck in the past. GDP gap
Rather than focus on the absolute GDP number that gets reported each quarter, Fieldhouse suggests focusing on a slightly more complex but ultimately more telling statistic: the GDP gap. This data point is based on data from the Congressional Budget Office, which calculates what the level of economic production in the U.S. would be if we were running at full employment and full output, and compares this with our actual output. The difference is the GDP gap or output gap, showing just how deficient the economy is. At the moment, that gap between what the country's economy is producing and what it could produce stands at more than 6%, or roughly $1 trillion. The good times won't truly begin until that gap closes.