Retirement and the Recession | 2010 Economic Recovery?

By Mike Rowan, 10/30/2009

2010 Economy More Promising?

Most retirement and investment accounts are still bruised as a result of the last year and 1/2. As the stock market has recovered, many people are wondering if the worst recession since the great depression is behind us for good. Since our retirement is obviously important to us, we would like to feel better versed on how to judge the temperature of the economy ourselves, and whether or not the 2010 Economy holds more promise..

Most of us hear the newscasts throwing out figures left and right to justify their reasoning about economic data. Therefore, to give our readers a little bit of background on what it means to come out of a recession, we have put together the following explanations regarding the terms and definitions associated with the economy.

What is a Recession, and how does a Recession End?

A recession is typically declared once we have 2 consecutive quarters of negative GDP growth. We have had 2 recessions this decade, the 1st coming right after 9-11, and the current one that everyone is hoping will soon be behind us. Before the 2001 recession, the last recession is in 1991, with that 10 year period of economic growth being the longest continual positive growth in recorded history without a downturn.

Economic data is the barometer by which we judge whether or not we are still in a recession officially. While there is no set guideline for ending a recession, the general concensus for declaring the end is when the economy moves past the point where the economy started receeding. So, to answer everyones queston, given that we continue the economic numbers from the 3rd quarter, we should be officially would of the recession in early 2010.

The 3rd Quarter Numbers Show Economy is Improving

Real gross domestic product (GDP) increased 3.5 percent in the third quarter of 2009 after decreasing 0.7 percent in the second quarter, according to estimates from the Bureau of Economic Analysis. The third-quarter increase was the first since the second quarter of 2008.

Gross Domestic Product

The rise in real GDP reflected the following:

• Consumer spending turned up strongly. Spending on new cars and trucks was a big contributor, reflecting the federal “cash for clunkers” program, which was in effect in July and August.
• Housing increased for the first time in 15 quarters.
• Inventory investment, exports, and government spending also added to growth.

Prices

Prices of goods and services purchased by U.S. residents increased 1.6 percent in the third quarter after increasing 0.5 percent in the second quarter, mainly reflecting an upturn in energy prices. Excluding food and energy, prices rose 0.5 percent after rising 0.8 percent.

Personal Income

In the second quarter, personal income was boosted by government payments to recipients of social security and other benefits enacted in American Recovery and Reinvestment Act. Coming off those payments, personal income declined in the third quarter.

Current-dollar personal income fell 0.5 percent after rising 0.6 percent. Real disposable personal income—income adjusted for inflation and taxes—declined 3.4 percent in the third quarter after increasing 3.8 percent in the second quarter.

The personal saving rate—personal saving as a percent of current-dollar disposable personal income—was 3.3 percent in the third quarter. In the second quarter, it was 4.9 percent.