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Economy slowly crawling back four years after 2008 election

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Updated: December 6, 2012 6:14AM



Flashback 2008: job losses in free fall, a housing market boom gone bust and credit markets in crisis amid the Great Recession.

Four years later, the U.S. economy continues to climb out of the hole that engulfed it at a still sluggish pace, and economists say it will take many months to regain all the millions of jobs lost.

Since the darkest days of the recession, which began in December 2007 and ended June 2009, the job market has gone from losing a high of 818,000 jobs in January 2009 to adding jobs for 25 straight months and creating an average of 173,000 jobs a month since July. But 12.3 million people remain unemployed.

The jobless rate, which hit a high of 10 percent in October 2009, came in at 7.9 percent last month, only the second time it has been below 8 percent since January 2009. But it’s still far above the more normal 4.7 percent rate it stood at in November 2007.

Economic growth, or so-called gross domestic product, has gone from shrinking 8.9 percent in the fourth quarter of 2008 to growing at a rate of 2 percent in the most recent quarter.

“The economy is undergoing a slow recovery that is fairly typical for the aftermath of a financial crisis,” said economist Sergio Rebelo, professor of International Finance at Northwestern University’s Kellogg School of Management. “The current episode is the only financial recession in the post-war period, and financial recessions are different. … [They] are deeper and longer.”

Indeed, the Great Recession lasted 18 months and cost the U.S. economy more than 8 million jobs, or 6 percent of total employment. That was the largest rate of job loss except for the 1980 recession, when 8 percent was lost, Rebelo said.

In terms of the number of job losses, it was the most since the Great Depression, noted Thomas Mondschean, professor of economics at DePaul University.

It could take another 18 months to regain all the jobs that were lost, said Chicago-based Morningstar Inc. economist Robert Johnson.

The slow jobs recovery is similar to patterns following the 1991 and 2001 recessions, economists noted. After the 1991 recession, employment didn’t reach pre-recession levels until five years later, according to research done by economists Nir Jaimovich of Duke University and Henry Siu of the University of British Columbia.

Following the 2001 recession, employment hadn’t returned to the pre-trough level by the time the Great Recession began, their research showed.

Another major reason for “the sluggishness of the recovery is the weakness of consumer balance sheets and the tightening of credit by banks recapitalizing their balance sheets,” said Mondschean.

Another big difference with the Great Recession was the implosion of the housing market, which sent home values plunging, left millions with underwater mortgages and pushed others into foreclosure and bankruptcy, he said.

But the housing market is mending. Home prices rose 11.3 percent nationally in September and marked the seventh straight monthly year-over-year increase, according to the latest report from the National Association of Realtors. U.S. builders started construction on homes in September at the fastest rate since July 2008, a Commerce Department report released last month showed. Housing starts, which came in at an adjusted annual rate of 872,000, up 15 percent in September from August, are now 82.5 percent above the recession low rate of 478,000 in April 2009, but that’s still well short of the 1.5 million economists consider healthy.

Among other positive economic news, manufacturing activity is expanding. And consumer confidence, which propels spending that contributes to economic growth, surged last month to the highest level in nearly five years at 72.2, nearly triple the all-time low of 25.3 hit in February 2009, but below 90, which is consistent with a strong economy.



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