Has the “Great Recession” Really Ended?

It has been widely reported that the Great Recession officially ended in June 2009. If a recession is at the bottom of the cycle, it is only positive from that point in time – correct?

Regardless of your circumstance, let’s consider the nation as a whole and review some statistics. Obviously, I am not an economist but we must draw our own conclusions based on the reported stats and our own research.

                                                                        2010                         2012                         2014

Employment to population Ratio           58.5% (3/10)          58.5% (3/12)            58.9%(3/14)

Participation Rate                                      65.2%(4/10)            63.8%(3/12)             63.0%(1/14)

Median Income                                           $49,445                   $50,020          Estimated $52,000

Those making $23,492 a year for a family of four, or $11,720 for an individual were considered to be living in poverty.

This is the first time the poverty rate has remained at or above 15% three years running since 1965.

Source: CNNMONEY

National Debt as Percentage of GDP    86.4% (1/10)     101.7% (6/12)         Estimated 120%

           

Inflation Rate                                               1.24% (7/10)           1.41% (7/12)            1.5% (4/14)

Note: remember the inflation rate does not include food and energy costs          

Consumer Price                                         217.63(3/10)           229.39(3/12)           236.29(3/14)

The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Source: BLS

Median price of Ex. Homes                      $177,900                $171,250            $189,900(3/14)

Gas / gal                                                        $2.68 (9/10)           $3.78 (9/12)             $3.67 (4/14)

Ground Beef/ lbs                                        $2.49                          $3.08                          $3.61

2008

Bush signs stimulus package - Feb. 11, 2008. Bush to sign stimulus package Wednesday. President said he's looking forward to signing $170 billion economic stimulus package passed last week by Congress. Consumers could see tax rebate checks by May. CNN MONEY

$170,000,000,000

2009

Obama focused on the $787 billion stimulus plan, an ambitious package of federal spending and tax cuts designed to revive the economy and save millions of jobs. Most wage-earners will soon see the first paycheck evidence of tax breaks that will total $400 for individuals and $800 for couples. NBC News (Feb 2009)

$787,000,000,000

2010

QE1

After completing the purchase of $1.25 trillion in mortgage-backed securities, $300 billion in Treasury bonds and $175 billion in federal agency debt, the Fed ended QE1. Bankrate.com

2011

QE2

The Fed continued to reinvest payments on securities purchased during the QE1 program.

In addition, it began the purchase of $600 billion of longer-term Treasury securities.Bankrate.com

2013

QE3

The Fed is planning to buy another $40 billion in mortgage-backed investments each month until the economy improves. That's on top of the tens of billions of dollars in mortgages it already had been buying each month, making U.S. banks flush with cash.Bankrate.com

2014

QE Tapered - Dec. 18, 2013 to now

The Fed begins to reduce its asset purchases from $85 billion per month to $75 billion, then to $65 billion per month, but maintains the program as unemployment remains high and inflation, low.

The central bank continues to keep the federal funds rate at zero to 0.25 percent, and expects to keep it there at least as long as:

The unemployment rate remains above 6.5 percent and inflation remains contained, or

The inflation rate lags behind the committee's 2 percent goal if the unemployment rate dips beneath the 6.5 percent threshold.

NOTE:   April, 2014 the unemployment rate fell from 6.7 percent to 6.3 percent. Source: BLS,

NOTE:   April 2014 the latest annual inflation rate for the United States is 1.5% source:BLS

NOW WHAT?  We are between the sword and the wall.

1.  The Fed continues its practice regardless of their policy which would indicate a more dire economy

OR

2.  Russia invades Alaska and we all forget about the economy

OR

3.  The Fed adheres to their policy and gradually raises the prime rate which will raise interest rates. Please note the median price of homes --- raising interest rates to 6% would stop housing in its tracks which would lead to another recession.

Median price of Ex. Homes         

Year                Median Price          Interest Rate             with 3.5% down                  Monthly PI

                                                            Jan 1st                  Mortgage Amount                Payment

2010:              $177,900                   5.07%                         $171,700                               $929  

2012:              $171,250                   3.92%                         $165,300                               $782

2014               $189,900                   4.31%                         $183,300                               $908

                       

End of 2014

                        +3%                            1/1/15 (If the Fed does what they need to do)

                        $195,600                   6.00%                         $188,700                               $1,131

So to purchase this median priced home, you will need about $7,000 for a down payment and about $6,000 for closing costs and other expenses i.e. inspections, attorney, etc. 

Your salary would have to be $59,000 to qualify for this mortgage. Assuming of course your debt is not out of the ordinary!

Charlotte Rentals

	All Beds	1 Bed	2 Beds	3+ Beds
Median:	$1333	$1223	$1452	$1345

 Washington DC Rentals

	All Beds	1 Bed	2 Beds	3+ Beds
Median:	$2686	$2407	$3435	$3497

  Your alternative is the rent but the monthly rent in most cities continues to climb. 

The harsh reality is that the Fed has put us in a bind by pumping money into the economy which has not reached main street. The harsh reality that keeping interest rates low has not sustained a growing economy. The policies of the "inside the beltway" politicians has also failed to sustain a growing economy. 

We are between the sword and the wall. 

It is only a matter of when the next shoe will fall.