As much as we’d like to believe we reside today in a real-time world that provides us a constant understanding of the current reality, the truth is, we’re often still stuck with out-of-synch perceptions, long after reality has moved on.
For example, yesterday on NPR, I heard Tina Brown recommend the Harvard Business Review article called, “The Acceleration Trap (teaser only).” The article sounds interesting, but, as the recap of the interview indicates, “Brown (said) this study is particularly resonant in the current down economy.”
From a perception standpoint, and especially if you’re out of work, it’s easy to believe we’re in “a current down economy.” But from a technical standpoint, we’re likely several months, or perhaps as long as a year, into a “recovering” economy.
It takes up to 12 months, or even longer, for the organization that officially declares whether or not the economy is heading up or down to make that call. The National Bureau of Economic Research has not yet “called” the bottom, but I predict (which is easy for me, as I’m not an economist, just a guy with a blog) that in the next few weeks, they’ll send some smoke up the chimney and declare the economy hit bottom in April, 2009. And, like it or not, when the NBER declares a date on which the economy hit bottom, that becomes the date historians will forever use to mark a recession’s end. Sure, it could take years for the economy to not be down compared to its previous high, but that period between low and high is considered “recovering” or “improving” and not “falling” or “down.”
[Later: See note below.]
If my prediction is correct, it will mean the recession that started in December, 2007, officially lasted 16 months. As I wrote in late 2008, we have gone through two recessions with 16-month durations since 1973. This one certainly seemed to have more of a negative psychological impact on us than what I can recall of the earlier ones. However, historians, not we, will be the ones who sort out whether or not it was, indeed, the worst since the great depression or a garden variety recession greatly magnified in importance for a variety of reasons related to political timing, the corresponding collapse in New York-based financial institutions, its global nature or because it was the first recession to occur in the era of Twitter (a proxy for real-time, online, global word-of-mouth, chatter).
Our personal reality will always influence our personal perception of the economy. We will always gravitate towards those statistics and economic punditry that reinforce our personal perceptions.
Actual reality sometimes takes a lifetime, or even longer, to fully comprehend.
[Update: On April 10, an article appeared in the New York Times, reporting, “The (NBER) plans to announce on Monday that it cannot yet declare an end to the recession that began in December 2007, several members indicated on Sunday. Such an acknowledgment is rare in the history of setting dates to business cycles and could affect the behavior of investors and consumers.” All I can say is: Wimps!]