What are Green Shoots?
A term used to describe signs of economic recovery or positive data during an economic downturn. The term green shoots is a reference to plant growth and recovery, and has been used during down economies to describe signs of similar growth.
One of the first uses of the term green shoots was by Chancellor Norman Lamont. He used it to describe signals of economic growth during the economic downturn in the United Kingdom in 1991. The comment was widely criticized due to the dire financial straits that many UK citizens were dealing with, despite whatever signs of recovery the chancellor saw. Even with this controversial start, the phrase has caught on with economists and politicians as a way to imply that recovery is underway even if it doesn't seem to be the case from the general public's perspective.
- Green Shoots is generally used to signs of recovery from an economic recession.
- The term was first used by UK chancellor Norman Lamont to refer to economic growth during the economic downturn in the United Kingdom in 1991.
- Ben Bernanke used the term to describe a nascent recovery during the financial crisis but was widely criticized for it.
Understanding Green Shoots
Green shoots gained greater notoriety when it was used by U.S. Federal Reserve chairman Ben Bernanke to describe a nascent recovery during the financial crisis in a 2009 interview with 60 Minutes. As with earlier usages, it was seen by Bernanke critics as wishful thinking combined with a lack of appreciation for the economic pain that Americans were experiencing as part of the financial crisis. Other people saw it as a vote of confidence in the U.S. economy's ability to recover. A few at the time even tried to extrapolate the statement into a signal on interest rate hikes as it the norm with any statement from the Fed or its chairman.
When Green Shoots Don't Grow
Bernanke wasn't entirely wrong with his comments. The worst of the economic damage from the mortgage meltdown, including the failure of Lehman Brothers, was in fact over. However, the green shoots Bernanke saw were not a robust growth that led to a quick recovery. Instead, the rate of economic contraction and the risk of more large scale financial system failures had lessened. For years after the green shoots comments, people continued to struggle with underwater mortgages and job losses as economic growth failed to come anywhere near the pre-financial crisis levels.
Green shoots falls in that class of statements that economists and politicians roll out when they need people to believe the worst is over. Other favorites include the "glimmers of hope" Obama used the same year to describe the state of the economy or the oft-used "we are on solid footing". Whether these statements are backed by solid economic data or not, they do have the power to take over the media narrative and shape public opinion.