FacebookTwitterGoogle+RedditEmail

Excuses for a Pathetic Recovery

by DEAN BAKER

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.

 

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

February 08, 2016
Paul Craig Roberts – Michael Hudson
Privatization: the Atlanticist Tactic to Attack Russia
Mumia Abu-Jamal
Water War Against the Poor: Flint and the Crimes of Capital
John V. Walsh
Did Hillary’s Machine Rig Iowa? The Highly Improbable Iowa Coin Tosses
Eliza A. Webb
Hillary Clinton’s Populist Charade
Uri Avnery
Optimism of the Will
Roy Eidelson Trudy Bond, Stephen Soldz, Steven Reisner, Jean Maria Arrigo, Brad Olson, and Bryant Welch
Preserve Do-No-Harm for Military Psychologists: Coalition Responds to Department of Defense Letter to the APA
Binoy Kampmark
Julian Assange, the UN and Meanings of Arbitrary Detention
Shamus Cooke
The Labor Movement’s Pearl Harbor Moment
W. T. Whitney
Cuba, War and Ana Belen Montes
Vincent Emanuele
The Curse and Failure of Identity Politics
Jim Goodman
Congress Must Kill the Trans Pacific Partnership
Peter White
Meeting John Ross
Colin Todhunter
Organic Agriculture, Capitalism and the Parallel World of the Pro-GMO Evangelist
Ralph Nader
They’re Just Not Answering!
Cesar Chelala
Beware of the Harm on Eyes Digital Devices Can Cause
Weekend Edition
February 5-7, 2016
Jeffrey St. Clair
When Chivalry Fails: St. Bernard and the Machine
Leonard Peltier
My 40 Years in Prison
John Pilger
Freeing Julian Assange: the Final Chapter
Garry Leech
Terrifying Ted and His Ultra-Conservative Vision for America
Andrew Levine
Smash Clintonism: Why Democrats, Not Republicans, are the Problem
William Blum
Is Bernie Sanders a “Socialist”?
Daniel Raventós - Julie Wark
We Can’t Afford These Billionaires
Enrique C. Ochoa
Super Bowl 50: American Inequality on Display
Jonathan Cook
The Liberal Hounding of Julian Assange: From Alex Gibney to The Guardian
George Wuerthner
How the Bundy Gang Won
Mike Whitney
Peace Talks “Paused” After Putin’s Triumph in Aleppo 
Ted Rall
Hillary Clinton: the Good, the Bad and the Ugly
Gary Leupp
Is a “Socialist” Really Unelectable? The Potential Significance of the Sanders Campaign
Vijay Prashad
The Fault Line of Race in America
Eoin Higgins
Please Clap: the Jeb Bush Campaign Pre-Mortem
Joseph Mangano – Janette D. Sherman
The Invisible Epidemic: Radiation and Rising Rates of Thyroid Cancer
Andre Vltchek
Europe is Built on Corpses and Plunder
Jack Smith
Obama Readies to Fight in Libya, Again
Robert Fantina
As Goes Iowa, So Goes the Nation?
Dean Baker
Market Turmoil, the Fed and the Presidential Election
John Grant
Israel Moves to Check Its Artists
John Wight
Who Was Cecil Rhodes?
David Macaray
Will There Ever Be Anyone Better Than Bernie Sanders?
Christopher Brauchli
Suffer Little Children: From Brazil to Flint
JP Sottile
Did Fox News Help the GOP Establishment Get Its Groove Back?
Binoy Kampmark
Legalizing Cruelties: the Australian High Court and Indefinite Offshore Detention
John Feffer
Wrestling With Iran
Rob Prince – Ibrahim Kazerooni
Syria Again
Louisa Willcox
Park Service Finally Stands Up for Grizzlies and Us
Farzana Versey
Of Beyoncé, Trudeau and Culture Predators
FacebookTwitterGoogle+RedditEmail