Where economy has, and hasn't, bounced back

| Friday, April 5, 2013, 12:01 a.m.

WASHINGTON — From household wealth to spending at stores, many of the economy's vital signs have recovered from the damage done by the Great Recession.

Home foreclosures and layoffs have dropped to pre-recession levels. Economic output has rebounded. And the Dow Jones industrial average is in record high territory.

So is the economy back to full health? Not quite.

Not with unemployment at 7.7 percent and with 3 million fewer jobs than when the recession began. And while the housing market is improving, that engine of economic growth and job creation still has far to go before it can be declared healthy.

Perhaps the best way to think about the economy is this: After five painful years, it's nearly back to where it started when the recession began. What's different now is that the trends are much healthier. Gone are the fears that the economy could fall into another recession.

“We've made a lot of progress,” said Michael Gapen, senior U.S. economist at Barclays Capital.

The recession officially began in December 2007. It ended in June 2009. Here's a look at ways in which the economy has returned to pre-recession levels and ways it has not:

What's back:

• Household wealth: Americans lost $16 trillion in wealth during the recession, mainly because home values and stock prices sank. Those losses have now been reversed. Household “net worth” reached $66.1 trillion in the final three months of 2012, according to the Federal Reserve. That was just 2 percent below the peak reached in autumn 2007. And steady increases in stock prices and home values this year have allowed Americans as a whole to regain all their lost wealth, though many individual families have yet to recover. Increased net worth is vital to the economy because it typically drives more spending. Net worth equals the value of homes, investments, bank accounts and other assets, minus debts such as mortgages, student loans and credit card balances.

• Retail sales: Just as household wealth has recovered, so has consumers' willingness to spend more to shop, eat out or go on vacation. That trend has spurred job growth at retailers and restaurants. Retail sales totaled $421.4 billion in February. Adjusted for inflation, that was nearly 18 percent above the recession low and just 0.7 percent below the record level in November 2007.

• Layoffs: The job market remains weak by some measures. But consider this: If you have a job, you're less likely to lose it than at any other point in at least 12 years. That marks a sharp turnaround from the depths of the recession, when layoffs soared — from 1.8 million in December 2007 to 2.6 million in January 2009. In January this year, employers cut 1.5 million jobs — the lowest monthly total in the 12 years the government has tracked such data. That explains why the number of people seeking first-time unemployment benefits each week has plummeted. That number reached 667,000 one week in March 2009, the most in nearly 25 years. Over the past month, weekly applications have averaged 354,000, only slightly more than in December 2007.

• Foreclosures: Among the most visible signs of the recession were the “Foreclosure” and “Bank Owned” signs that dotted housing developments across the country. But home prices have been rising steadily. Foreclosures have sunk back to pre-recession levels. Banks repossessed 45,000 homes in February 2013, according to RealtyTrac, a foreclosure listing firm. That was the fewest since September 2007 and was down from a peak of 102,000 in March 2010.

• Stock market: Last month, the stock market finally regained the painful losses investors suffered during the recession. The Dow Jones industrial average closed at an all-time high of 14,253.77 on March 6. That topped its previous peak of 14,164.53 in October 2007. The Dow had plunged all the way to 6,547.05 in March 2009. It closed even higher on Tuesday at 14,662. 01. And the Standard & Poor's 500 stock index, a broader measure of the market, reached a record 1,570.25.

• GDP: America's economy is producing more goods and services than before the recession began. In the final three months of 2007, it produced an annual rate of $13.3 trillion in goods and services, a record high. That figure had shrunk to $12.7 trillion when the recession ended. It then began to recover. The U.S. gross domestic product, the broadest gauge of production, regained its previous peak by the end of 2011. And in the final three months of 2012, GDP was $13.7 trillion. Still, that gain comes with an asterisk because the population has grown. Viewed on a per capita basis, GDP at the end of 2012 remained 1.5 percent below its pre-recession peak.

What's not back:

• Total jobs: The United States still has many fewer jobs than in December 2007. The recession eliminated 8.7 million. Since then, 5.7 million jobs have come back, leaving the economy 3 million short. And the population of Americans 16 and older has grown by 13 million since then. As a result, a much smaller proportion of people are either working or looking for work than before the recession. The labor force participation rate — the percentage of adults with a job or seeking one — has sunk from its pre-recession level of 66 percent to 63.5 percent in February. That matches a 30-year low.

• Unemployment rate: When the recession began, unemployment was 5 percent. Now it's 7.7 percent. Probably no figure better illustrates the downturn's lingering damage. The unemployment rate is well below the recession's peak of 10 percent in October 2009 but far above the 5 to 6 percent range associated with a healthy economy. Twelve million people are unemployed. Yet that figure does not include 2.6 million people who have stopped looking for work.

An additional 8 million work part-time but want full-time work. Combining all those groups, 22.6 million people are either unemployed or “underemployed.” They represent an underemployment rate of 14.3 percent, down from a peak of 17.1 percent in April 2010.

• Housing: The housing market has been recovering for about a year but still has not reached normal levels. Previously occupied homes were sold in February at a seasonally adjusted annual rate of about 4.98 million. An annual rate of about 5.5 million would be healthy. In the recession, sales had bottomed at 3.8 million. And last month, builders began work on a seasonally adjusted annual rate of 917,000 homes. That's way up from a recession low of 478,000. But it's still far from a healthy annual rate of roughly 1.5 million. Prices have risen nearly 9 percent since bottoming in March 2012, according to the Standard & Poor's/Case-Shiller index, but they remain 29 percent below their pre-recession peak. Still, housing differs from other sectors: Its peaks occurred during a housing bubble that eventually burst. Few expect or even want prices to return to those levels soon. Most economists welcome the steady but modest growth housing has achieved in recent months.

• Auto sales: Auto sales have nearly returned to where they were. Americans bought cars at an annual rate of nearly 16 million in December 2007. Sales plunged to 10.4 million in 2009. In March this year, the annual sales pace was 15.3 million. The rebound has stimulated hiring and restored the once-bankrupt General Motors and Chrysler to health.

• Industrial output: Factories are not back to their pre-recession peak of output. But they're getting closer. Production was about 5 percent lower in February than in December 2007, according to the Federal Reserve. The Fed also tracks industrial output, a broader measure that includes mining and utilities. That figure is just 1.8 percent below its pre-recession peak.

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