W-Shaped Recovery

After the economy has taken a nosedive, it’s time to recover and get back up on that horse. Economic recoveries come in all shapes and sizes, just like Americans. Really though, there exist actual “shapes” that economic recoveries take on graphs that can tell us things, like voodoo witchcraft (or just “economics”).

Things like GDP and employment can be graphed. During a recovery, these factors have taken a drop, and we’d like to see them on the up-and-up. Sometimes, they make a W-shape, dropping, then going up a little, dropping again, and going back up finally. Kind of like when you’re watching a fight in an action movie: the hero takes a big hit (first line of the W), making the audience gasp. Then he gets back up (second line of the W, going up), and you can feel the hope rising. He takes another hit and falls back down (third line of the W, going down). Everyone wonders: is this the end of him? Then he rises triumphantly, and everyone remembers: this is Hollywood, of course (last line in W, going up).

A W-shaped recovery can be seen after The Great Recession. A W-shaped recession is a rough one with ups and downs, i.e. not an immediate or even quick recovery. People who think it’s a simple V-shaped recession, so they jump back in to buy stocks in the market too soon...get burned a second time when the market dips down again. Confidence is all over the place, up and down. No doubt about it that W-shaped recessions mean a rough ride.

Some economists call W-shaped recessions “double-dip” recessions. And we all know how big of a no-no double-dipping is. Even for the economy.