Boom – thud! – Economic recession…how far is recovery?

Is recession in US coming to an end or is the recovery far from reality?

Recession is a characterized as a period of negative growth or fall in the real national product, contraction in the employment, income and output levels. Going by these traits the real GDP growth of US was 1.1% in 2008 and -3.2% in the 2009. Unemployment levels are at an all time high and the consumer spending has been whipped. There is recession for sure and this one has been the longest recession in the US since World War II.

There are several regulatory laws that the Obama government has introduced. There are several new fiscal and monetary policies that are introduced every day; the idea is to make the markets more regulated than ever. The million dollar question here is with these regulatory norms being introduced are we actually amending the loopholes and giving ourselves a reassurance that the recession is deep buried for good? The answer is uncertain and is more of a trial and error than thoughtful move.

What the government has been able to do is to ease of the credit crunch by introducing more money into the market. The bubble in the US economy took place when there was more of credit available to people which was not backed by the income. Today the government may have painted a pleasing picture by splashing all over in the headlines that the borrowings have increased, investment in asset backed securities have picked up and the investors are getting confidence in the markets as well. But there is still no income.

The capital market is surely the strength of an economy and also reflective of the performance and indicator of growth. We should not forget that the capital market acts as a catalyst. It only strengthens what the performance of the individuals put together would be. The injections of the household savings into the economy and the income levels will churn the growth on macro level. The solution to the problem does not lie in printing more of currency when there is shortage of it.

There is a mixed bag of reactions on whether recession has ended in US. The Fed claims that the recession is over. As per Morgan Stanley report most executives feel that the recession is over. A poll of Fortune 500 CEOs indicates that 75% of the best CEOs disagree that the US recession is over.

The recession would end when the market activities would pick up when consumer spending increases backed by income. Some analysts expect the US economy to shrink by 2.8% this year after 1.1% growth in 2008. The economy’s graph has gone bungee jumping and the recovery is far from near and is still very feeble and in its nascent stage. The recovery period no doubt has taken much longer and recovery speed much slower than political spin predicted.