Defining Recovery Down (No 'Summer of Recovery')

What are we to make of the most recent jobs report, which shows that (a) unemployment increased from 9.5 percent to 9.6 percent and (b) nonfarm payrolls fell by 54,000 last month? If you’re White House press secretary Robert Gibbs, you tweet, “Don’t be fooled — the economy added 67,000 private sector jobs, 8th straight month of added private sector jobs, job loss came in Census work.” Picking up on this, David Mark, Politico’s senior editor, writes this:

The answer is “no.” To understand why, it might be helpful to put things in a wider perspective.

For one thing, the so-called underemployment rate, which includes workers who are working part-time but who want full-time work, increased from 16.5 percent to 16.7 percent. During our supposed “Recovery Summer,” we have lost 283,000 jobs (54,000 in June, 171,000 in July, and 54,000 in August). And for August, the employment-population ratio — the percentage of Americans with jobs — was 58.5 percent. We haven’t seen figures this low in nearly three decades. As Henry Olson of the American Enterprise Institute points out, “Since the start of this summer, nearly 400,000 Americans have entered the labor force, but only 130,000 have found jobs. … America’s adult population has risen by 2 million people since [August 2009], but the number of adults with jobs has dropped by 180,000. The unemployment rate declined slightly despite these numbers, from 9.7 percent to 9.6 percent, because over 2.3 million people have left the labor force entirely, so discouraged they are no longer even looking for work. ”

Keep in mind that all this is occurring during a period when job growth should be considerably higher, at least based on past post-recession recoveries. Former chair of the Council of Economic Advisers Michael Boskin points out that “compared to the 6.2% first-year Ford recovery and 7.7% Reagan recovery, the Obama recovery at 3% is less than half speed.” Bear in mind, too, that today’s jobs report comes a week after the GDP for the second quarter was revised downward, from 2.4 percent to 1.6 percent. Economists generally agree that the economy needs to grow 2.5 percent to keep unemployment from going up, and a good deal better than that to begin to bring it substantially down.

What all this means, I think, is that we’re not in a recovery at all, at least not in any meaningful sense. And those who insist otherwise are (to amend a phrase from Daniel Patrick Moynihan) Defining Recovery Down.

The most recent GDP figures also have harmful fiscal ramifications. For example, estimates for the deficit this year (more than $1.3 trillion) are based on both the Congressional Budget Office’s and the Obama administration’s assumption of roughly 3 percent growth. If growth is well below that, government revenues are going to be lower than estimated. And so this year’s deficit and net increase in the debt are going to be worse than even the (already quite troubling) projections. Meanwhile, the Federal Reserve has very few, if any, arrows left in its quiver. It has done just about all that can be done.

The narrative the Obama administration is trying to sell is that we were on the edge of another Great Depression but avoided it and are now, in the president’s oft-repeated phrase, “moving in the right direction.” If we persist in following Obama’s policies on spending, taxes, and regulations, Obama assures us, we will build on this recovery and turn a sluggish one into a strong one. At the end of Obamaism lies the land of milk and honey.

This is wishful thinking. The economy right now is sick and, in some important respects, getting sicker. And the president is pursuing policies that are not only not helping; they are downright counterproductive.

This economy is the New Normal. I say that because, from everything I have seen in various business reports in various sources (Wall Street Journal, Crain's Chicago Business, Business Week, CFO Magazine, Fox Business News), the leaders of business are waiting out Barack Obama's time as President.

As long as "Business" is waiting to see what new tax or regulation will be next, nobody is going to do any expansion of substance. "Business" is going to ride the tide, keep trying to make profits or minimize losses during the administration's attempts to transform America, and hope that the next transition of government is smooth and orderly.

And that drops down right to the line that involves putting people on the payroll. As long as the money expects that 9-10% unemployment is the normal, this is how things are going to be.

The alternative is to expect Barack Obama to become somebody else; somebody who has actually made a payroll in the private sector and knows that it takes a stable economic environment to get investors out of "Hold". And that is just not a realistic expectation.

Many years ago, I was told by my Econ instructors that 4% was the same as full employment, because at that level most unemployed people were unemployed voluntarily. They were moving to another part of the country, they were changing marital status, graduating from school, just out of the military, etc.

Now 9-10% unemployment is the New Normal. An economy that is driven by consumer spending is not going to recover while consumers don't know how long their paycheck or other income sources will remain stable or growing.

Welcome to America. Please check your enthusiasm at the door.

Unfortunately, I think you’re correct.

And part of the problem will be that many media outlets will gladly emphasize the “New Normal” as a means for souring hopes that we will ever return to the days of 5% unemployment, and to try to make individuals feel more dependent upon the government for the basic necessities.

The people of Spain have grown accustomed to the New Normal in that country of 20 % unemployment- the ultimate question I think then is, do we slowly head down a path of accepting a similar future, or do people (limited as their economic options may be at this point) strive to return to the days of economic prosperity, and vote accordingly.

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