By Emily Grace
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The End is in Sight
Economic expert Dr. Ken Mayland believes the recession is over and recovery is well underway
Many Americans are starting to wonder: Is the recession really over? As the gross
domestic product (GDP) grows and
initial unemployment insurance claims
decline, one economic expert gave a
favorable forecast for the economy and
discussed whether the current growth is
sustainable.
Dr. Ken Mayland, president of
ClearView Economics, LLC, in Pepper
Pike, Ohio, presented his observations
about the end of the recession and his
outlook for the months ahead in his
presentation at ACA International’s 71st
Annual Convention in Washington,
D.C., on July 12, 2010.
“If we think back to the convention
held last year in Las Vegas, times were
pretty grim,” Mayland said. “At that
time, I stated the recession was about to
end and the economy was beginning to
emerge.”
End of the Recession?
On April 8, 2010, the Business Cycle
Dating Committee of the National
Bureau of Economic Research reviewed
all relevant indicators to determine when
economic activity hit its low point, which
would mark the end of the recession that
began in December 2007.
“Although most indicators have
turned up, the committee decided that
the determination of the trough date on
the basis of current data would be
premature,” the committee stated in its
April 12, 2010, memo. “Many indicators
are quite preliminary at this time and
will be revised in coming months.”
Although the NBER has not made an
official declaration of the recession’s end,
Mayland believes economic recovery is
already underway.
“Not only is the recession over, but
we’ve just about seen the first
anniversary of the recovery.”
According to ClearView Economics’
Recession Indicator, the economy
bottomed out in June 2009 and has been
on the rise ever since. For those skeptical
of this indicator, Mayland believes
weekly initial claims for unemployment
insurance provide additional economic
insight.
According to the U.S. Department of
Labor, the weekly initial claims for
unemployment compensation peaked in
March 2009, with claims topping
650,000. The number of initial claims
has decreased steadily since that time.
“When you look at the behavior of
weekly initial claims for unemployment
compensation at or around the time past
recessions have ended, you see a clear
consistent signal,” Mayland said. “When
weekly claims peak and lower, within
zero, one or two months, the recession
has ended.”
According to the DOL, for the week
ending July 24, 2010, there were 457,000
initial unemployment claims. Mayland
noted the drop from the peak in March
2009 was followed by a few months of
decline, with the recession ending in
June 2009.
The momentum of economic growth
can also help determine the end of the
recession.
“In the first half of 2009, all the
momentum of the economy was to the
downside,” Mayland said. “Flash forward
a year and we see GDP and industrial
production showing growth on a year-over-year basis.”
Is Growth Sustainable?
While the economic growth
experienced is a positive sign, is it
sustainable?
According to
the Bureau of
Economic
Analysis, GDP
has
experienced
growth for the
last three
reported
quarters. In the
third quarter
of 2009, GDP
grew 2. 2
percent, with the
fourth quarter of 2009 and the first
quarter of 2010 growing by 5. 6 percent
and 2. 7 percent, respectively.
Consumer Confidence
A return or improvement in consumer
confidence is the first indicator for
sustainable growth. Higher consumer
confidence usually leads to higher
consumer spending. To determine
consumer confidence, Mayland turns to
the personal savings rate.
“When people are scared about the
economy, they increase their savings rate
and take consumer spending out of the
economy,” Mayland said. “In the spring
of 2009, the savings rate was at 6 percent,
but for the first half of 2010, it was 3 to 4
percent.”
Many people may wonder how
consumer confidence can improve when
the unemployment rate remains at 10
percent. Mayland suggested:
• Stock prices rose 65 percent from
March 2009 to December 2009.
• The government has proactively
lowered taxes and interest rates.
