Three years ago this month, chaos ruled in financial markets.
Huge financial companies, such as Lehman Brothers, Merrill Lynch and AIG were stumbling, and government officials were scrambling to prevent a global financial meltdown. They threw together bailouts and pushed weak companies to merge with stronger ones.
The central bankers, Treasury officials and lawmakers eventually did manage to reassure investors enough to restore order in the financial system. However, the aftershocks of the crisis are still being felt today.
Some 14 million people continue to look for work in this country, and millions more struggle to hang on to their homes and retirement savings. For them, the tough times continue.
Still, as bad as it may have felt, the period covering the past two years could not be labeled a recession. Economists define a true recession as a sustained period — usually six months or more — when economic activity is declining across the board. During such times, retail sales are falling, jobs are disappearing, houses aren't selling and factory production is dropping.
That's the sort of broad-based decline that started spreading in 2007 as the housing foreclosure crisis began taking hold. The National Bureau of Economic Research, which is recognized as having the authority to call a recession, says that by December 2007, the entire U.S. economy was shrinking. It continued shrinking for the next 18 months — the longest recession since the 1930s.
That official recession ended in June 2009, when growth resumed in most sectors. In the first half of 2010, the growth rate was approaching a healthy 4 percent, but then the economic rebound faded. This year, growth has been crawling along at around 1 percent or less.
The economy is being held back by a number of forces, including many coming from overseas. For example, global growth has been slowed by this spring's earthquake in Japan and the political upheavals in oil-producing countries in the Middle East. The debt crisis in Europe is an especially heavy drag on the U.S. economy because it is creating uncertainty about the global banking system.
As a result, the stretch from 2007 to today has felt like one nonstop recession for the millions of people who have lost jobs, homes and retirement savings. Last week, the Federal Reserve Board assessed this recovery and concluded that there are still "significant downside risks."
Economists have been tossing out different labels to describe this strange period when recession and recovery seem indistinguishable to so many people. Here are a few:
"The Great Recession" — This term started turning up frequently in 2008 as a play on the phrase "Great Depression," a term associated with the 1930s, when banks failed and the economy crashed.
"The Lost Decade" — This phrase was used often to describe Japan during the period from 1991 to 2001, when growth in that country fell dramatically after an asset-bubble burst. Now, some economists say that describes the U.S. situation today: Investors are facing a Lost Decade characterized by historically low interest payments and a troubled stock market.
"The New Normal" — This a phrase that has gained a lot of traction recently. It refers to the idea that the U.S. economy will be characterized by growth of just 1 or 2 percent for a long stretch of years. That's well below the healthy growth rate of 3 or 4 percent that was the normal in the second half of the 20th century.