Economic Recovery Perception Danger

As we look for signs of recovery from our current recession, we may see different trends that may not correlate too well. This past week, the stock market has had a small-scale surge. Whether or not this continues remains to be seen, but I believe that eventually the market will recover and long-term investors (especially in those all-important retirement accounts) will recoup their losses. However, one important fact needs to be taken into consideration.

In a recovery following a recession, one of the last statistics to turn around is the unemployment rate. In fact, unemployment may continue to rise for a while at the same time that businesses are starting to show profitability again. While this tends to bother some people, the current situation dictates restraint on their part.

During this recession, our federal government, under both the previous and current administrations, has pumped more than a trillion dollars worth of economic stimulus and recovery money into the economy and stands to take much of the credit (and responsibility) for ending the recession. With this may come the temptation to criticize profitable businesses who had benefited from the various "stimuli" but haven't rehired their laid-off employees. And some may be continuing to down-size their payroll as they make their comeback. I know that this criticism is on the way, and government officials may be tempted to try to dictate, through hearings and legislation, that businesses take back workers. This would be a horrendous mistake, in my opinion. Some of those businesses needed to change their directions in order to remain viable. As they begin to grow, they will increase their staff to fit their needs. And the unemployment rate will naturally go down. As it has done in the previous five (my own count) post-World War II recessions. As Al Gore has stated (regarding a different topic), this is "an inconvenient truth".