Excuses for a Pathetic Recovery


The September jobs report showed that the U.S. economy created just 103,000 jobs in the month, 45,000 of which were the jobs of Verizon workers who were returning from a strike in August. The economy has created 99,000 jobs a month over the last three months, about 9,000 more than it needs to keep pace with the growth of labor force. At this pace, it will be around 80 years until the economy gets back to normal levels of unemployment.

Nonetheless, the news accounts told the public that the jobs numbers were better than expected. After all, at least the number of jobs is growing; the economy has not sunk back into recession.

Of course slow growth is better than a recession. But this is like saying that we are better off with one major hurricane hitting the East Coast than two. This is true, but why would we expect that two major hurricanes would hit the East Coast in the same year?

This is the same logic with the double-dip recession story. In the last several months many economic analysts have been running around with scary stories about a double-dip recession. While the stories were scary, they never made much sense.

Every recession that the United States has had since the Great Depression has been triggered by a plunge in housing and car sales. It is very difficult to imagine sharp falls in either of these sectors at this point primarily because current sales levels are already very low. At worst, we could see a modest downturn in one or both sectors which would have a limited impact on the economy.

By contrast, other sectors of the economy are growing, albeit very modestly. Consumption, which is 70 percent of GDP looks to be on a 2-3 percent growth path over the second half of 2011. Investment in equipment and software is likely to grow at close to a 10 percent annual rate. Government is shrinking, but only at 1-2 percent annual rate. This slows growth, but since this sector is only 20 percent of GDP, the shrinkage in government is not nearly large enough to turn GDP negative.

With one exception, there really is not a plausible story whereby the U.S. economy goes into a second recession. The exception of course is the meltdown of the Eurozone from a disorderly default of one or more of the heavily indebted countries. However, this outcome will be determined by the greed and ineptitude of the IMF, the European Central Bank, and the European commission, the troika managing negotiations with the debt-troubled governments. The current strength of the U.S. economy has little direct bearing on the willingness and ability of the troika to bring about an orderly resolution of the crisis.

The spread of the double-dip nonsense matters because it provides a backdrop in which politicians and the media can tell us that we somehow should be happy about really bad economic news. By lowering expectations enough, even the pathetic September jobs numbers can be made to look good.

This is not the first time the media has played this game. At the start of the downturn we had any number of political figures and “experts” telling us that we were at risk of a second Great Depression. This line was constantly repeated so that most of the public probably thinks it is true. In fact, Ben Bernanke, who is after Alan Greenspan the person most responsible for the economy’s collapse, was actually named Time Magazine’s Person of the Year, precisely because he prevented a second Great Depression. Of course he also prevented a return of the Black Death.

In reality, we never had any reason to fear a second Great Depression. The first Great Depression was caused not just by mistakes in responding to the financial crises at its onset, but also by the failure to provide a sufficient boost to demand to get the economy back on its feet again. The massive stimulus due to World War II that finally restored the economy to full employment could have just as easily occurred in 1931 as 1941, if there had been the political will.

There is nothing magical about spending on war that generates jobs. Spending of the same size on public works, public education, and public health would have had the same effect.  We know this now, which is why there was never any reason to think that a bad turn of events in the 2008 financial crisis would have condemned us to a decade of double-digit unemployment.

Political figures routinely use the media to create absurdly bad counterfactuals so that their actual performance will look good by comparison. Economics reporters should know how to evaluate arguments so that they don’t pass along these nonsense counterfactuals to the public. They should also not make a point of relying almost exclusively on economic experts who end up being wrong on almost everything.

Unfortunately, we are far from that point today. As a result, people will have to do their own homework to recognize that the September jobs numbers really were awful and that they should be very angry at politicians who refuse to do anything to boost the economy.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of False Profits: Recovering from the Bubble Economy . He also has a blog, ” Beat the Press ,” where he discusses the media’s coverage of economic issues.

A  version of this article was published by The Guardian.


Weekend Edition
November 27-29, 2015
Andrew Levine
The Real Trouble With Bernie
Gary Leupp
Ben Carson, Joseph in Egypt, and the Attack on Rational Thought
John Whitbeck
Who’s Afraid of ISIS?
Michael Brenner
Europe’s Crisis: Terror, Refugees and Impotence
Ramzy Baroud
Forget ISIS: Humanity is at Stake
Pepe Escobar
Will Chess, Not Battleship, Be the Game of the Future in Eurasia?
Vijay Prashad
Showdown on the Syrian Border
Dave Lindorff
Gen. John Campbell, Commander in Afghanistan and Serial Liar
Colin Todhunter
Class, War and David Cameron
Jean Bricmont
The Ideology of Humanitarian Imperialism
Dan Glazebrook
Deadliest Terror in the World: the West’s Latest Gift to Africa
Mark Hand
Escape From New York: the Emancipation of Activist Cecily McMillan
Karl Grossman
Our Solar Bonanza!
Mats Svensson
Madness in Hebron: Hashem Had No Enemies, Yet Hashem Was Hated
Walter Brasch
Terrorism on American Soil
Louisa Willcox
Grizzly Bears, Dreaming and the Frontier of Wonder
Michael Welton
Yahweh is Not Exactly Politically Correct
Joseph Natoli
A Politics of Stupid and How to Leave It Behind
John Cox
You Should Fear Racism and Xenophobia, Not Syrian Refugees or Muslims
Barrie Gilbert
Sacrificing the Grizzlies of Katmai: the Plan to Turn Brooks Camp Into a Theme
Rev. William Alberts
The Church of “Something Else” in “an Ecclesiastical Desert”
Andrew Gavin Marshall
Bank Crimes Pay
Elliot Murphy
Cameron’s Syrian Strategy
Thomas S. Harrington
Jeff Jacoby of the Boston Globe and the Death of Ezra Schwartz
Gareth Porter
How Terror in Paris Calls for Revising US Syria Policy
Michael Perino
The Arc of Instability
Yves Engler
Justin Trudeau and Canada’s Mining Industry
Tom H. Hastings
ISIS and Changing the Game
Lars Jørgensen
Vive la Résistance
John Halle
A Yale Education as a Tool of Power and Privilege
Norman Pollack
Syrian “Civil War”?: No, A Proxy War of Global Confrontation
Sheldon Richman
Let the Refugees In
James Anderson
Reframing Black Friday: an Imperative for Déclassé Intellectuals
Simon Bowring
UN Climate Talks 2009: a Merger of Interest and Indifference
Ron Jacobs
Rosa Luxemburg–From Street Organizer to Street Name
Aidan O'Brien
Same-Sex Sellout in Ireland
David Stocker
Report from the Frontline of Resistance in America
Patrick Bond
China Sucked Deeper Into World Financial Vortex and Vice Versa, as BRICS Sink Fast
Majd Isreb
America’s Spirit, Syrian Connection
James A Haught
The Values of Jesus
Binoy Kampmark
British Austerity: Cutting One’s Own Backyard
Ed Rampell
45 Years: A Rumination on Aging
Charles R. Larson
Chronicle of Sex Reassignment Surgery: Juliet Jacques’s “Trans: a Memoir”
Jeffrey St. Clair - Alexander Cockburn
CounterPunch’s Favorite Films
November 26, 2015
Ashley Nicole McCray – Lawrence Ware
Decolonizing the History of Thanksgiving