Is This What It Feels Like?

The Great Recession officially started in December of 2007. It officially ended in June of 2009, according to the National Bureau of Economic Research. However, the economic recovery since that time has been anemic to say the least — “In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity,” the NBER reported in September 2010. After meandering around for over three years since the end of the recession, the economy seems to be returning closer to a normal recovery pattern. This is an extremely long time for a period of returning to normalcy. There is some good news regarding this struggle we have had. For one, the overall recovery has been weaker than normal, yet should last longer than a normal recovery. And we have already seen that interest rates have stayed lower for a longer period of time.

As a matter of fact, this period of record low interest rates is absolutely unprecedented in our history. We will note that oil prices have fully recovered from recessionary prices a while ago. It was only recently that rates started to rise. So the next question is–will rates continue to rise as the economy gets stronger? The most important data to watch in this regard are the employment numbers and releases within the real estate sector. Certainly, these two factors are tied because as one gets stronger so does the other. Right now, we are not seeing numbers that show our economy is overheating. Retail sales are still struggling, especially outside the automobile sector and energy expenditures. Car sales continue to be in recovery mode along with the real estate markets. The bottom line? Yes, the recovery seems to have reached a new phase, but this is not a strong recovery as of yet. We are still in danger of influences that could scale back the recovery and if these scenarios occur, rates could continue to stay low. However, if momentum continues to build, rates could continue to increase in the short run.

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