The saw-tooth recovery

So, that's it then – the UK economy is now almost certain to come out of recession at the end of this year.
How do we know this?
Well, figures out this morning show that in the three months from April to June, the economy shrank by 0.8%.
That's still a huge amount of production (and jobs) lost compared to the past and more than analysts had expected.
But it's nothing like that walloping 2.4% fall between January and March, when the economy was falling like a stone.
The sentiment among experts now seems to be that UK plc is bumping along the bottom. Indeed, those are the exact words used by Charlie Bean, the deputy chief of the Bank of England, in an interview I did with him a few days ago.
We're now into what economists call a "saw-tooth" period. This is their way of describing a period when the UK's economic performance goes up and down by a little bit but is still following a pretty much flat line.
While it's understandable for people to be pessimistic during a recession (especially if they have lost their jobs), you can actually put forward an argument that says businesses and the people inside them have coped incredibly well with a colossal financial shock.
We've gone through a period where an overflowing bath of credit has simply gushed down the plughole in what seems like a matter of seconds, leaving businesses large and small high and dry.
A lot of businesses have closed, a lot of jobs have gone. Indeed, it is still likely that sometime next year unemployment may well break through the three million barrier – a dismal milestone in this day and age.
But the severity of the financial collapse led many to worry it might have been far, far worse.
What has prevented a financial drama turning into a real jobs crisis has been a new found flexibility in the workplace: the willingness to tolerate pay cuts and enforced holidays so that firms can save scarce cash while still retaining the skills, experience and commitment they will need when the economy picks up again.
In past recessions, people simply got the push as firms faltered. Lost skills meant a longer recovery.
So when will it pick up again? Not for a long while yet, despite the skills retention.
Even when it comes out of recession – a purely technical term, remember – businesses and the people who work for them are going to find it slow going for perhaps a couple of years after that.
This is because the debt mountain that collapsed underneath us all in late 2007 still has to come back down to a manageable size.
That means banks will be reluctant to lend anything like as much as they did in the boom, while consumers will be cautious about taking on big loans.
And both businesses and consumers will be watching over their shoulders to see how the next Government intends to pay back all the money borrowed to prop up a sick economy.
The balance between tax and spending could well be the decisive factor in how long that saw-tooth hangs around.