“A statistical recovery but a human recession.”

Dr. Larry Summers, a former Secretary of the U.S. Treasury who is now President Barack Obama’s top economic adviser was responding to a question about a rebound in the U.S. economy.
Essentially, what Summers, a former President of Harvard University, meant was that figures say one thing but reality is another story.

He explained the rationale behind his surprising answer by insisting that one shouldn’t talk about an economic recovery while millions of housing foreclosures had either just been completed or looming on the horizon or both. Just as bad, national unemployment seemed stuck at 9.5% and the prospect of seeing light at the end of the proverbial tunnel wasn’t on the radar screen.

The questions and answers about “the recovery” are important to Barbados and its Caribbean neighbors because of the significant impact the most drastic global recession since the 1930s has had on countries everywhere. Economies have been ravaged - Britain, Greece, Jamaica and the Eastern Caribbean are examples. Any turn-around in the U.S. economy would be considered a rainbow of hope over the Caribbean after a damaging flood.

After all, the accepted wisdom is when the U.S. economy suffers from pneumonia; the Caribbean can expect a near death experience.

But if Dr. Summers, a chief architect of Obamanomics, was lukewarm to the idea of a turn-around, Jim McNerney, Boeing’s chief executive officer, wasn’t.

“There is more business confidence out there,” he told Bloomberg Businessweek. “This administration deserves significant credit.”

Evidence of the statistical recovery is clear:

• The U.S. economy is growing again, rising to an annual growth rate of almost 6 per cent, 5.6% to be precise, in the fourth quarter of 2009.  Most economists are revising their forecasts, upping them to 3 per cent from the 2.1% they had initially estimated for 2010.

• The U.S. manufacturing sector, a key barometer, has grown for eight straight months.

• In March, the economy added 162,000 jobs, a monthly rate of expansion that hadn’t been seen in three years.

• Since March 2009, the Standard & Poor’s 500 stock index has jumped by more than 74 per cent.
• Commodity prices haven’t simply rebounded, they have surged.

• The U.S. dollar has strengthened as the international currency markets recorded an almost 10 per cent spurt since last November against a basket of currencies.

• Although foreclosures remain a serious problem, mortgage rates have remained low while housing prices have stabilized, no longer falling off a cliff.

• Corporate profits have risen by 8% in the fourth quarter at a time when labor productivity or worker output went up by almost 7%

Looking at where the economy was when President Obama took over and where it is today, it’s statistically undeniable that the economy has turned the corner. In January last year, banks were failing, the automobile industry was on life supports, losing more than 250,000 jobs and General Motors was on its way to filing for Chapter X1 bankruptcy protection. As if that wasn’t bad enough the financial markets were in turmoil.

Back then, too, economists, including Paul Krugman were so pessimistic that they warned against a “lost decade” for the U.S. economy, much like Japan.

But after arranging a US$787 billion fiscal stimulus package, bailing out banks and the insurance behemoth AIG, and car companies to the tune of US$700 billion and later securing Congressional approval for a hefty health care reform package, Obama is beginning to see positive results. No questions asked.

Not that the American people are paying attention. In a recent national poll, the President’s approval rating had plummeted to 44 per cent, its lowest level since he was sworn into office and by almost 2-to-1 people across the country complained that the economy had gotten worst instead of improving.

But how does Charlie Skeete, a retired senior economic adviser to the Inter-American Development Bank in Washington view all of this? Is the jar half full or half empty? He believes it’s the latter.
“I think the so-called economic recovery in the United States is exaggerated,” he told The Broad Street Journal. “I am not alone in that view. Indeed, I am bolstered in that view by people in the United States who are far more knowledgeable and far more well-informed about the U.S. economy than I am. There are signs and the Chairman of the U.S. Federal Reserve Ben Bernanke best described them as ‘green shoots’ of recovery. ‘ You see a little here and a little there, statistical indicators that suggest the economy is not continuing to decline at the rate at the rate at which it was declining six months or eight months ago.”

The former Barbados Ambassador in Washington complained that commentators “are exaggerating” the rate of the recovery. To boost his argument, he cited the increasingly rate of housing foreclosures, high unemployment and the “lack of recovery in many critical sectors to insist that Americans across the board were not “sharing in this recovery.”

If that sobering analysis is accurate then, there is little good economic news for Barbados and other Caribbean states which are looking to a surge in the economic tide to lift their boats which had run aground.

Skeete’s cautious approach is shared by the International Monetary Fund and others.
Youssef Boutros-Ghali, Egypt’s Finance Minister, who chaired a recent meeting of the Fund’s Policy making committee, agreed that “the worst is definitely behind us” but was quick to say that “we are not out of the woods yet.”

Byron Blake, a former top Caricom economist who went on to become senior economic adviser to the Group of 77 Developing countries and China, thinks Caribbean nations shouldn’t expect any immediate benefits from the glimpse of the recovery in the rich countries but should look to 2011 for better days.