Grinding It Out

Invictus here, folks.  (Have I mentioned what a pain in the ass it is to track down references to my work since Morgan Freeman and Matt Damon stole my name?).

Now that the NBER has officially dated the end of the recession, it probably makes some sense to start putting comps in terms of “from the trough” instead of “from the peak.”  I know, I know, the recession hasn’t really ended.  It doesn’t feel much like a recovery.  The depression is ongoing.  Yes, I get all that, and I agree.  But, as BR has pointed out on more than one occasion, it is indisputable that we are experiencing some growth in key metrics, however slow and painful it might (as I’ll demonstrate in a moment).  Point is, whether or not I want to agree that we’re still in recession doesn’t change the fact that the NBER says we’re not.  So, in the interest of pursuing the “truth,” as BR likes to say, I just have to stipulate that we’re in recovery and growing — as unacceptable and anemic as that growth might be — and revisit some comps indexed to troughs.

As part of a post in July, I presented a chart showing Final Sales of Domestic Product (indexed at that time to economic peaks).  The chart showed that Final Sales (FINSAL at FRED) were experiencing their slowest recovery on record.  I have updated the chart — below — to reflect indexing at economic troughs and also include the latest data available.  What has not changed is that this is the slowest recovery on record for Final Sales.

What is interesting is that the second slowest FINSAL recovery on record was from the Q42001 trough, and the third slowest was from the Q11991 trough.  In other words, FINSAL has been getting progressively weaker coming out of the last three recessions.  Coincidence?  I think not.

I’ve referenced our demographics in some previous posts here and elsewhere, and this trend plays right into that theme.  The median boomer– born in 1955 — was a spendthrifty 36 years old in 1991 (the year that housing bottomed and a housing boom ensued).  That same boomer still had some gas in the tank — at 46 years old — in 2001.  Now, however, at 55 years old, that boomer is pretty much done.  He’s trying to recover from massive twin bubbles not even a decade apart while working feverishly on his abacus to see if he’ll ever be able to retire.  Boomers are downsizing (or at least trying to).  They may now be empty nesters (unless the kids moved back in to the basement).  They want to sell their home, but not at the price the realtor tells them it’s worth; the real estate related dollar signs they saw in 2006 (and probably extrapolated 10 years forward) translated into a more comfortable retirement.  Oops.  Now what?

Further, it does not help matters that there will be no Social Security COLA increase for the second year running.  Living on a “fixed” income has never been quite as “fixed” as it is now, with no cost of living adjustments.  Not a positive development for the senior set.

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