Let’s take a quick trip around the field of economics to answer some of the most interesting questions I have been asked during this winter's speaking tour. The winter weather and flight inconsistencies have sure placed a burden on meeting planners!
How does the recent Great Recession compare to the Great Depression?
In the Great Depression, gross domestic product (GDP) dipped slightly over 50%. The latest economic downturn finds that GDP in this country was reduced by only 4.1%.
Has the economy recovered?
This depends on where you live in the U.S. The Midwest, for the most part, did not participate in the Great Recession. The East and West Coast economies and Southern economies were hit hard. The GDP that was lost during the Great Recession is back to prerecession levels. Before one becomes too joyful, much of it is based on consumption and the wealth effect as a result of the stock market increase. Investment, which has increased, is still in inventory that needs to be sold. The deficit and government-related activities are negative components of GDP.
Unemployment is still high. Will it continue?
The unemployment rate has maintained above an 8% rate for over 20 months – a historical record. Automation by corporate and small businesses to improve efficiency is a factor of the high rates. Unemployment and housing will have to return to normal numbers for a full recovery.
Oil is still the black swan to the agricultural and domestic economy. At the time of this article in early March, producers and consumers are starting to feel inflation at the gas pump. This variable in itself could place the U.S. back into recession.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]