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Is a Jobless Recovery a Recovery?

Posted by Larry Doyle on November 16, 2009 2:20 PM |

Cartoon by Steve Breen, The San Diego Union-Tribune

Jobless recovery seems to be a phrase economists and analysts are using with increasing frequency. In my opinion, this usage is akin to a drug dealer or liar repeating his rationalizations to the point where he believes his own bulls%&t.

Are we to believe this economic subterfuge? I believe the American public buys into this rationalization at our peril. Why? Let’s navigate along the most important leg of our economic landscape.

Our unemployment rate currently stands at 10.2% while the underemployment rate is 17.5%. On the heels of the unemployment report released on November 6th (see my summary here), many analysts and economists revised their projections for unemployment to 11% and some as high as 14%.

Just today, Fed Chair Ben Bernanke in a speech at the Economic Club of New York highlighted the fact that the current excess supply of labor in our economy is even worse than indicated. Ponder that for a second. The lead banker in our nation is telling us that our unemployment situation is even worse than statistics would indicate. What does that mean?

Excess supply of any commodity – be it labor, goods, services, or products – will drive the price of that commodity down. As such, as the price of labor declines, incomes will decline as well. In the process of declining income, personal consumption and accompanying retail sales will not grow.

With sluggish, if not negative, personal consumption and retail sales, companies will reluctantly rebuild inventories, add overtime to existing laborers, or add temporary workers without benefits prior to adding the fixed costs of hiring new employees.

What burden does that place on federal and municipal governments? The added burden of providing increased programs and services to help these individuals and the economy at large. Municipalities will be forced to increase taxes given their obligation to balance their budgets. Increased taxes will also serve as a drain on incomes . . . and the vicious cycle will perpetuate.

Jobless recovery? I don’t think so. Perhaps analysts and economists should try jobless bounce. The economy and markets may be bouncing from the precipitous freefall of last year, but without job growth the economy is not recovering. Ultimately, the economy is about putting people to work.

Why do economists, analysts, and government officials work so hard to sell the phrase ‘jobless recovery?’ To rationalize the billions, if not trillions, in dollars being implemented across the financial industry and the economy at large.

Wall Street fooled the American populace once by buying into the concept of managing risk through securitizations. Will the American populace allow Washington to fool them by selling the concept of a jobless recovery?

As Danielle Park, my fabulous guest from last evening’s broadcast of No Quarter Radio’s Sense on Cents with Larry Doyle, informed us: ‘time reveals truth.’ At this time and for the foreseeable future, the truth of our current economy is that without job growth there is no real economic recovery.


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