Jobless Recovery Can Be Avoided

The National Bureau of Economic Research (NBER) through its Business Cycle Dating Committee determines when recessions begins and ends. The last recession they dated was from March to November 2001 which is sometimes called the dot-com recession. The rationale of the NBER for choosing these specific dates can be viewed here.

In choosing the dates of business-cycle turning points, the committee follows standard procedures to assure continuity in the chronology. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee views real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, the committee therefore places considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis of the U.S. Department of Commerce. The traditional role of the committee is to maintain a monthly chronology, however, and the BEA's real GDP estimates are only available quarterly. For this reason, the committee refers to a variety of monthly indicators to determine the months of peaks and troughs.

The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment.

How many believe the recession ended in November 2001?

Not American workers. This is total private employment by month:

Not the profit driven market.

Not even Economic Cycle Research Institute (ECRI).

I imagine the political pressure on the NBER is great to end a recession. No politician running for re-election wants to have an election cycle under the pale of a recession. I imagine saying a recession is over is good for politics – but is it in the best interests of the country?

I have a suggestion for the NBER. Employment is the key marker for recessions. This is not my words – but the NBER's. If it were not for what happens to jobs, talk of recessions would be limited to the business pages.

When Americans public visualizes a recession, they see soup kitchens and people on the dole. Not many visualize investors looking at their brokerage statement.

A “jobless recovery” is an oxymoron. It was a terrible mistake to set a precedent which allowed a recession to end while employment levels were falling. This had not occurred in any other recession ever.

There is no question the NBER errored in marking the end of the last recession in November 2001. Will they repeat this same mistake for our Great Recession by ignoring employment?

The NBER is letting the politicians and the Fed off the hook –

• They are stimulating the economy in a manner which does not generate jobs.
• The stimulus passed earlier this year would have looked very different if the politicians realized that jobs were the criteria for ending the recession.
• We need to wake up to the reality that without jobs, long term economic growth is not possible. This decade our population has grown over 7% - while job growth is only 4%.
• The NBER can decide whether people are the victims of a recession or wallets are. If I were on the NBER committee, I would vote with the people.

The NBER is in a position to send a clear signal that the basis of sustainable economic recovery is jobs. It is the right thing to do.

Hat tip to Steve at MEMETICS & MARKETING for editing support.

Disclosures: None

Comments

[chap08:]

OK but how do you fix unemployment? We're not in a position to indulge in more stimulus spending. To fix unemployment, we need to see further devaluation of the dollar. Help exports, hurt imports and boost the domestic economy as a result. A painless solution? Of course not, but just what we need.

Sep 15 08:04 AM

[John Galt:]

> They are stimulating the economy in a manner which does not generate jobs.

I think the other point is that you don't want to "just" create jobs, you want meaningful jobs that create growth. I mean, you could pay 200 people to dig a giant hole, and then pay another 200 people to fill it back up, but that doesn't do anything except transfer wealth from tax payers to the diggers ( and create sore backs).

I see your point that if the NBER were to "end" the Recession, political points "could" be scored, but what happens if we have 1-2 quarters of posiitve growth followed by a double dip recession? I think most people would be able to see that they really weren't out of the woods in the first place. Also throw in the fact that even "if" real GDP turns positive for a quarter or two, even the bull economists talk about high unemployment ( peaking next year). That doesn't go over well for voters.

I was reading in the WSJ or Washington post ( can't remember which one) about some of the jobs created in the 787 billion dollar stimulus. They were highlighting some seasonal workers cleaning up ( maybe creating) a bike path in Arizona near the grand canyon. Is that really the lasting jobs that Americans wanted? Sweeping away dirt and rocks off of a bike path?

Sep 15 09:04 AM

[Steve in Gr...:]

As a political matter, it does not matter what the NBER says. Under the current administration, the media will spin catastrophe as "better than expected". A substantial part of the American electorate is willing to believe what they are told rather than "their own lying eyes".

The purpose of the stimulus package was not to help accelerate the economy's own natural healing process. It was to expand the dead zone of government control.

The idea that the U.S. can win with a policy of further currency debasement is just silly. Helicopter Ben is competing with other central bankers in a game of chicken to see who can debase the most, the fastest.

The way to fix the economy is to remove the emerging risk of massive tax increases (imposition of a massive carbon dioxide tax, expiration of the Bush tax cuts, removal of the Social Security cap, imposition of a VAT, etc.), cut top marginal rates, get the government out of banking, auto manufacturing, health insurance.

Of course, we have a few more years before we have a chance of seeing any of that. So stay liquid.

Sep 15 09:16 AM

[Tony Petroski:]

The author wants more jobs. Commendable.

"A “jobless recovery” is an oxymoron. It was a terrible mistake to set a precedent which allowed a recession to end while employment levels were falling. This had not occurred in any other recession ever."

Err, well, yeah, I think it occurs in every recession. Businesses trim jobs, lighten the load, throw dead weight over the side until activity picks up. Then they scramble to hire and train new people.

Sep 15 09:24 AM

[TeresaE:]

What is being touted now is a customer-less economy.

Small businesses have been, and continue to be, eradicated, employees, contractors and the like are now squarely in the sights of the "cost cutting."

How, in an alledged 70% consumer driven economy can we have any recovery when there is little credit and less employment?

As to what the American people will believe, well come now. 90% will believe what they are told to believe and think their own family's demise and chronic under/unemployment is only happening to them.

Nearly all statistics released by the various "expert" boards and the government are skewed beyond reality. I watch tax collections to get a feel for the economy.

They really haven't been showing any recovery at all.

Sep 15 09:25 AM

[chap08:]

It is not silly to say that a lower dollar helps us. It is comments like this that are silly. How do you think that we can move forward with an over valued dollar and consequent massive trade deficit? Where do you think the jobs will come from? How do you think we can afford big tax cuts without hurting other areas of the economy, and more importantly, hurting real people and jobs? We have had a nice time living beyond our means. Now we need to start earning our way in the world again.


On Sep 15 09:16 AM Steve in Greensboro wrote:

> As a political matter, it does not matter what the NBER says. Under
> the current administration, the media will spin catastrophe as "better
> than expected". A substantial part of the American electorate is
> willing to believe what they are told rather than "their own lying
> eyes".
>
> The purpose of the stimulus package was not to help accelerate the
> economy's own natural healing process. It was to expand the dead
> zone of government control.
>
> The idea that the U.S. can win with a policy of further currency
> debasement is just silly. Helicopter Ben is competing with other
> central bankers in a game of chicken to see who can debase the most,
> the fastest.
>
> The way to fix the economy is to remove the emerging risk of massive
> tax increases (imposition of a massive carbon dioxide tax, expiration
> of the Bush tax cuts, removal of the Social Security cap, imposition
> of a VAT, etc.), cut top marginal rates, get the government out of
> banking, auto manufacturing, health insurance.
>
> Of course, we have a few more years before we have a chance of seeing
> any of that. So stay liquid.

Sep 15 09:37 AM

[John Galt:]

TeresaE: The biggest threat to American small business is Obamacare. He put a big bulls eye on their backs with talk of raising their taxes (and putting them out of business) if they don't pay for their workers health care. It's like rasing the min wage. Some will be better off, but some will pay for it with their jobs. Paying for a workers health care might make 1 guy better off, but somebody else gets laid off or the whole place could go under. But they don't care, they'll tell the 1 guy that benefited that he benefited because of the government and they'll tell the poor guy that lost everything that it was "greedy business", and that the government will take care of him.

I've talked/read stuff from numerous people and small business owners who pledge to work less if Obama raises taxes for them. Is that what you really want to encourage? People to work less? They say they'd make as much as they can before the increases kick in ( say 249,999), then shut down for the rest of the year and enjoy leisure.

Sep 15 09:46 AM

[alajac:]

I don't understand why so many smart people can't see the forest for the trees. The jobs are going away permanently because a destructive technology is devouring them. You can either fight other countries for the scraps or you can figure out that the current economic resource distribution system has actually been broken for hundreds of years and that we now have the technology in place to replace it with something sustainable and fair.

Whoever owns the money owns the government and that is not "We, the People" since at least 1913. If we take back ownership of the money and the government, and start putting all new money into circulation via equal-dollar distributions to every legal resident, the coming Depression will be forestalled for many years.

If we ALSO compensate everyone (at least $1000/month) for the government's impairment of their right to free access to all land (similar to Tom Paine's suggestion in his "Agrarian Justice" plan), replace all income-based taxation with a small, flat "infrastructure maintenance fee" on all electronic debit transactions, and get government to get it's nose out of everything else it currently has its nose in (ending or phasing out ANY AND ALL other corporate and personal subsidies and regulation), we will start the next 200 year upswing (with no more manic booms and busts), reduce poverty, crime and market speculation, creating a totally stable economic regime based on liberty and personal responsibility.

Sep 15 10:49 AM

[Tom E.:]

We need to crack down hard on intellectual property theft. IP is the fuel that creates the new industries that developed countries need to soak up the employees who are displaced when older industries off shore their production.

Developed countries will move away from free trade if displaced workers can't find jobs in new industries.

Sep 15 11:59 AM

[TCK:]

If you watch CNBC you know the recession is over. Here is why.

Rising Stock Market; "Leading Indicator"

Rising unemployment; "Lagging Indicator"

Failing Banks; "Lagging Indicator"


Just think how bad the economy would be if the "Recovery" had not started !

Sep 15 12:30 PM

[Blair Dehuff:]

A "spending-less" and "jobless" recovery is an absurd concept that only a government official could dream up. The key to recovery is the consumer, and consumer spending is has fallen OFF A CLIFF. It has fallen for 4 of the last 6 quarters, which is something that has never happend before since they began keeping records in 1947. Consumer spending is down 33% from a year ago, and discretionary spending in the U.S. is now down to the lowest level in 50 years.

Government numbers crunchers claim that spending is actually "up 2 1/2%." However, this doesn't really fool anyone because everyone knows this is only temporary government "stimulus" spending. Does anyone really believe Cash4 Clunkers is leading the way into recovery?This is like saying a terminal patient is recovering because you gave him an aspirin.

If this is "recovery", let's hope we don't get much more of it.

Sep 15 01:12 PM

[conceptwizard:]

A report released Sunday says two of five working-age Californians do not have a job, underscoring the challenges in one of the toughest job markets in decades. A new study has found that the last time employment levels among this group were this low was February 1977.
The study was done by the California Budget Project, a Sacramento-based nonprofit research group that advocates for lower- and middle-income families. The report said that California now has about the same number of jobs as it did nine years ago, when the state was home to 3.3 million fewer working-age people.

California Budget Project executive director Jean Ross recommended Congress adopt a second extension of unemployment insurance benefits. Those checks pay between $200 and $1,800 a month depending on a worker's previous earnings.

Sep 15 02:14 PM

[Mad Hedge F...:]

qqt Fed chairman Ben Bernanke say the recession is “technically” over. This will be great news for the people living in the tent city under short finals who I fly over when I land at Buchanan airport. It means “technically” they will eat tonight. It will also be welcome to the 18% of the workforce who are now unemployed in California, the 1.5 million who are losing unemployment benefits in the next three months, and one million college students who ran up and average $30,000 in debt to graduated this year so they could sleep on their parents’ sofa. Traders celebrated the news by running the S&P 500 up to 1,054, a positively nose bleeding 58% above the March 9 low. Apparently, the stock market thinks Obama is the greatest president in history, rising some 40% since the inauguration, compared to a 30% drop during the eight years of Bush rule. That is some report card. Too bad we can’t annualize that. The only thing I approve of today is that this love fest took silver to a new high this year of over $17. Wake me up when the party is over, and I’ll drag your drunken carcasses into the car and drive you home. Then I’m going to cash in a couple of my sliver dollars and take my significant other out for a Corona and some vegetarian burritos.

Sep 15 03:12 PM

[Blair Dehuff:]

Mad Hedge>

Buchanan International Airport? Besides flying over a tent city, do you also still fly over a driving range? If so, be careful of those high pop-fly golf balls on takeoff and final approach. (Haven't been there for years).

But, seriously do you think silver will stay where it is for very long if there is in fact no "real" recovery anytime soon? (Forget about the jobless, spend-less kind). I think the long term fundamentals for PM's are good, but how about the short term (next 1 to 2 years)? Some PM newsletters are pretty negative about the short term.

On Sep 15 03:12 PM Mad Hedge Fund Trader wrote:

> qqt Fed chairman Ben Bernanke say the recession is “technically”
> over. This will be great news for the people living in the tent city
> under short finals who I fly over when I land at Buchanan airport.
> It means “technically” they will eat tonight. It will also be welcome
> to the 18% of the workforce who are now unemployed in California,
> the 1.5 million who are losing unemployment benefits in the next
> three months, and one million college students who ran up and average
> $30,000 in debt to graduated this year so they could sleep on their
> parents’ sofa. Traders celebrated the news by running the S&P
> 500 up to 1,054, a positively nose bleeding 58% above the March 9
> low. Apparently, the stock market thinks Obama is the greatest president
> in history, rising some 40% since the inauguration, compared to a
> 30% drop during the eight years of Bush rule. That is some report
> card. Too bad we can’t annualize that. The only thing I approve of
> today is that this love fest took silver to a new high this year
> of over $17. Wake me up when the party is over, and I’ll drag your
> drunken carcasses into the car and drive you home. Then I’m going
> to cash in a couple of my sliver dollars and take my significant
> other out for a Corona and some vegetarian burritos.

Sep 15 03:40 PM

[Pat C:]

Great article. Absolutely right on. We need direct investment in 21st Century capital improvements and create employment which is the only metric that matters. Our financial markets have failed in allocating resources to create employment. We can do better. Create and support new 21st Century markets (Like Alternative Energy Banks - why not - we did it for real estate?) and let the thieves run the bad banks until they are irrelevant.

Sep 15 07:13 PM

[OilFinder:]

A recession is when things, overall, are receding.

A recovery is when things, overall, are recovering.

If you imagine a recession and recovery as a V or U-shaped event, the downslope on the left side is receding. The right half is when it's recovering. It might be nice to look only at one factor such as employment in determining the ending and beginning dates, but if everything else *besides* employment happened to be headed up the right side of the V or U, your decision would be overly biased towards just one measure while nearly everything else is improving. While jobs is certainly an important measure - in fact I would agree it's the most important one - it nonetheless is still just one of many measures.

Sep 15 09:20 PM

[yen4pesos:]

Good job Steve, ... as always. I'm in total greement .I guess that makes all 14 of us... As you know, what you speak of is ideal, a state that we can only hope to achieve. Also, as you know, It will never transpire for the very same reasons you point out. All that we can do is identify and sit back down to read your investment account statement (as you point out).... But, if we understand the reality, then, in fact, we do have a tool to work with. I find that most often, It is more useful to to be able to use the limited tools that we have,... as opposed to having a complete toolbox... I enjoy your works... keep up the march....

Sep 15 10:22 PM

[Pearle Bob:]

Amen.

[e-mail]


On Sep 15 09:16 AM Steve in Greensboro wrote:

> As a political matter, it does not matter what the NBER says. Under
> the current administration, the media will spin catastrophe as "better
> than expected". A substantial part of the American electorate is
> willing to believe what they are told rather than "their own lying
> eyes".
>
> The purpose of the stimulus package was not to help accelerate the
> economy's own natural healing process. It was to expand the dead
> zone of government control.
>
> The idea that the U.S. can win with a policy of further currency
> debasement is just silly. Helicopter Ben is competing with other
> central bankers in a game of chicken to see who can debase the most,
> the fastest.
>
> The way to fix the economy is to remove the emerging risk of massive
> tax increases (imposition of a massive carbon dioxide tax, expiration
> of the Bush tax cuts, removal of the Social Security cap, imposition
> of a VAT, etc.), cut top marginal rates, get the government out of
> banking, auto manufacturing, health insurance.
>
> Of course, we have a few more years before we have a chance of seeing
> any of that. So stay liquid.

Sep 19 05:53 PM