What Are Double Dip Recessions?

And now for something completely different. Nah, not really. Time for some financial stuff. This time – what causes double dip recessions and what is the likelihood that we’re headed for one? In this first blog of a new series, I will examine the characteristics of double dip recessions, and discuss them from an historical perspective to show how rare they really are.

Many people fear that we are headed for a double-dip, but based mainly on a lack of consumer confidence, and not necessarily based on a pure economic data. For example, jobless claims spiked last month.

According to an Associated Press article, jobless claims rose “sharply”, indicating that layoffs are still happening. Many economists believed that the government’s official numbers might be artificially high in terms of job creation, because the government touted several million jobs created, but merely on a very temporary basis. Therefore, perhaps due to the falloff of census-related jobs, we are seeing a spike in jobless claims.

For this reason and many others, people believe we are headed for a double-dip, but first of all, what is a double dip recession, and what causes them?

Speaking by the book, a double-dip recession is when GDP growth starts negative (the initial recession), then increases again as the economy recovers, but finally the GDP goes negative again in the subsequent quarter. According to this article <http://www.minyanville.com/businessmarkets/articles/Kostohryz-double-dip-recession-recovery-obama/1/8/2010/id/26285>, double dip recessions have only occurred three times in American history since 1854 out of the 33 economic recessions since that time: in 1913, 1920, and then again in 1981.

But what has caused them historically? The answer lies in the nature of economies in general, which grow in a cyclical fashion. It takes a complete reversal of “inertial forces” to cause a double-dip recession, and this would mean that the economy would have to stop dead in its tracks very early in the recovery phase.

Apparently the chances are pretty slim that this will happen to this economy.

In my next blog, I will discuss more about double dip economies and the exact chances that our economy will fall again.

Chris Buchheit

Chris Buchheit

Chris Buchheit was born under the hot Floridian sun during some year in the 1980s. There he studied school matters until moving to North Carolina in 1999. Possibly due to the fact that his mom had enough of him being inside all the time, he quickly got involved in community affairs via the Boy Scouts of America, where he learned the values of citizenship, morality, duty to God and country, and that the biggest kids get to boss around the smaller ones. Chris attained the rank of Eagle Scout in 2004, and still values the rank as one of his proudest achievements. Beginning in 2006, Chris began attending the University of North Carolina at Chapel Hill, where he quickly learned the value of basketball and poplar trees. Since attending UNC, Chris has been double majoring in Asian Studies, with a concentration in Chinese, and Political Science. When he isn’t slaving over his honors thesis, looking up a bunch of Chinese Characters, volunteering, or mindlessly browsing the same websites over and over, Chris enjoys writing short stories and novels. Much to his roommates’ annoyance, he also spends his free time learning to play the guitar. Above all else, though, Chris values God, his family, and his friends. For the future, Chris plans to apply to Georgetown to further his studies in Political Science, hopefully with a concentration on China. Pending acceptance into Georgetown, Chris would like to study while gaining professional experience in a government job in Washington DC.
Chris Buchheit

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