Now I've Got It

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Published : May 31st, 2012
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Category : Crisis Watch

 

 

 

 

In "What We Talk About When We Talk About Recession," Bloomberg reports on yet another survey where the majority of respondents view things differently than the so-called experts on Wall Street.


Do feelings trump facts for small business owners? Three years after the Great Recession ended, 71 percent of small business owners indicated they “believe the United States economy is still in a recession,” according to a survey (PDF) of just over 1,000 of them released today by U.S. Bank (USB).


According to Bloomberg, the disparity between what most people are seeing and what is "really" going on is a definitional problem, resulting from the fact that the average Joe doesn't really understand the economic lingo.


To economists, a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales,” according to the National Bureau of Economic Research, which officially designates when a recession begins and ends.


That wonky definition doesn’t necessarily match how people perceive the economy, says Richard DeKaser, deputy chief economist at The Parthenon Group consulting firm. “It’s not uncommon to see these kinds of dramatic disconnects between experiences and perceptions,” he says. “Even though an economy may technically be expanding, as it has now for three years, most people feel the economy is in a recession if it’s operating below full employment” or its full potential.


The report also suggests that popular perceptions -- or rather, misperceptions -- about the state of the economy stem from a superficial and simplistic assessment of reality, made worse by sound-bite journalism.


Business owners’ view of the economy may also be colored by headlines about stock prices and unemployment that get more attention than the rather obscure calculations of turns in the business cycle, says Brian Headd, economist at the Small Business Administration’s Office of Advocacy. “What we see all the time are stock market levels and job levels,” he says. Neither the unemployment rate nor the S&P 500 have returned to their pre-crash levels, and Headd says many people think “my 401(k) isn’t back where it was yet, so it must be a recession.”


In sum, it appears, the reason why most business owners -- and most Americans -- believe the economy remains in trouble is because they don't have the same knowledge and skill set as the individuals who, as a group, failed to anticipate the worst financial crisis and most severe economic downturn since the Great Depression.


Now I've got it.


Michael J. Panzner 


 


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Michael J. Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes, published by Kaplan Publishing.
WebsiteSubscribe to his services
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Panzner's sarcasm is priceless. He again proves; you're better at spotting Hard Times if you DON'T have a degree in economics.
Latest comment posted for this article
Panzner's sarcasm is priceless. He again proves; you're better at spotting Hard Times if you DON'T have a degree in economics.  Read more
Gypsy - 6/2/2012 at 2:15 AM GMT
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