Are happy days here again?

OPINION: If indeed the recession is over, then by any account we have done remarkably well in negotiating our way through a minefield of woes. Just think back to the start of the year, and the fears of a global economic meltdown.

The soft-fuzzy images of greenshoots now emerging are about to be backed up by the cold hard facts which define a recession or lack of one.

Number-crunchers have confirmed five successive quarters of negative economic growth, and data out soon will almost certainly confirm a sixth (the three months to June 30).

But the September quarter we are now living through is expected to show a small (may be 0.2%) growth in GDP; growth could be positive by as much as 0.5% in the December quarter.

But that's textbook stuff. Are happy times really here again? Do we feel the recession is over?

For a fair swag of us, probably no. Even if we still have a job, we know family and/or friends who don't. And they are the people on whom the recession will continue to weigh heaviest, and for some time.

If we are in business, we may be seeing output starting to bottom and creep slowly up. We may be stocking up once again. But it's pretty meagre stuff. Retail sales may be moving, but at no great rate.

The housing market is an exercise in frustration. Houses are no longer stupidly expensive; the are just expensive, and there's talk they may get stupid again.

So no high-fives for the likely end of the technical recession, but rather the start of adjusting ourselves to the new world order that will follow the Big Dip of 2007-09.

Economists watch various triggers which indicate an improving economy rather than a technical recession. Among them: unemployment, domestic demand and the housing market.

Take employment. Jobless rates are still going up and will continue to do so well into next year. There's certainly not enough economic activity right now to soak up new entrants to the labour markets. In any case, employers did well to hang on to a lot of staff during the downturn, and for now they'll just get busier; there won't be new hirings.

But, by the middle of next year, more likely towards the end, there's an expectation unemployment may start to trend down. So, happiness once again.

Domestic demand: Good consumer confidence surveys, a rise in retail spending, and above all population growth are being tipped as factors that will spur a home-grown recovery through 2010. The risks: H1N1 flu, and drought.

Friday's retail spending data was a positive sign the value of seasonally adjusted total retail sales rose 1.1% in the June 2009 quarter, the first quarterly rise since March last year.

Housing market: This is seen as the factor that will lead the recovery. There seems to be consensus the housing market has corrected sufficiently to allow a bounce in activity in the next 12 months. Residential construction is expected to recover reasonably rapidly. The risks: Some form of capital gains tax to head off a premature property boom that caused so much angst last time round.

If indeed we have got through the technicalities of recession, there still remains the slower path to economic recovery and health. That won't come quickly. And the good signs we have seen so far may be tipped arse-over-face at any time by a whole host of factors from left field.

Maybe a new energy crunch with crude oil prices going through the roof and sending shock waves through entire economies. Or perhaps a new global credit crunch as banks face up to dealing finally with the trillions in bad loans still out there, still waiting to be written down or otherwise resolved.

If any of those happen, then forget the idea of a w-shaped recession in which we would continue to have heart palpitations and modest downturn strike us again next year before a proper recovery in 2011, instead of mid-to-late 2010.

Think instead of two very deep Vs.

On second thoughts, don't.

- © Fairfax NZ News