Issue of the week: How strong a recovery?
The economy has seen job growth for the third consecutive month, but the number of new jobs isn't keeping up with the growth of the workforce.
How can we gauge the strength of the recovery if we’re not even sure the recession has ended? asked Sewell Chan and Louise Story in The New York Times. The National Bureau of Economic Research, the arbiter of when recessions begin and end, is not yet willing to declare the “Great Recession” over, citing “a lingering worry that the economy could turn downward again in a so-called double-dip recession.” Employment growth, in particular, is so fragile that it could derail any comeback. Still, the latest employment report was encouraging, said Donald Luskin in SmartMoney.com, with jobs growing for the third consecutive month. But “the problem is that the job market is like a leaky bucket.” Even though jobs are being added, the employment rate isn’t rising, because the number of new jobs isn’t keeping up with the growth of the workforce.
In fact, we’re falling further behind, said Robert Reich in The Wall Street Journal. Since the recession started, in December 2007, 8.4 million jobs have vanished and the 2.7 million jobs needed to match the growth in the workforce haven’t materialized. So even if the economy starts to generate, say, 300,000 net new jobs a month, “we could be looking at five to eight years before catching up to where we were before the recession began.” But such robust job growth is almost inconceivable, since “many of the jobs that have been lost will never return.”
Don’t despair, said Daniel Gross in Slate .com. “The long-term decline of the U.S. economy has been greatly exaggerated.” The U.S. is rebounding faster than the economies of Europe and Japan, largely because the U.S. has moved faster to write off bad debts and liquidate dead enterprises. Going forward, “there will likely be fewer McMansions with four-car garages and more well-insulated homes, less debt and more capital, more exported goods and less imported energy.” As a result, we’re poised to resume growth on more solid footing. There’s no doubt that “the U.S. economy is undergoing a fundamental change,” said Robert Samuelson in The Washington Post, but it’s not clear whether it’s for the better. For the optimistic scenario to be realized, “the U.S. economy needs another growth engine.” Exports might fill that role, though a surge of protectionism could get in the way. We could be left depending on that fragile creature known as “public psychology.” The recession generated a pervasive pessimism that is itself a drag on growth. But consumer spending has seen a modest upswing, suggesting we could be experiencing a shift toward optimism—one that could “give the economy a surprising forward shove.”