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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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