Economic recovery with continued job losses?

[CoffeeCat]

I would really like to understand how our economy can lose jobs every month--as indicated by the
labor statistics--but be in an "economic recovery".

If the unemployment rate continues to climb--and it expected to hit 10 percent at the end of '09--how
can this possibly be a recovery?

Furthermore, housing foreclosures continue to happen at higher-than-average rates. Many ARMs will
reset in 2009, 2010 and 2011--causing many more people to lose their homes.

Seventy percent of the U.S. economy is consumer spending. The consumer rules. More than 10 percent
of these consumers will be unemployed at the end of 2009. Many that aren't unemployed are scared of
losing their jobs and they have reigned in spending.

I'm just not understanding what is fueling real recovery. And aren't most economic indicators (GDP, GNP,
consumer spending, housing starts) directly tied to the level of employment.

I'm also not understanding how this "recovery" is being measured.

[BlooInBloo]

1. Intermediate Value Theorem.

[earth mom]

2. It's all lies and spin-everyone knows that unless they are rethugs, bankster cheerleaders

or Obama fans.

Or in other words, those who have a vested interest in making shit smell like a rose.

[Selatius]

3. GDP reporting can include some odd things that may seem counter-intuitive.

A firm that specializes in liquidating the assets of foreclosed individuals and bankrupt businesses would be doing better business today than it was four or five years ago, and this would show up in GDP reporting as a plus, not a negative. These types of businesses are booming, including repossession businesses, bill collection agencies, etc.

Also, if an economy were really in an upturn with increasing unemployment, then there are two possible scenarios that could cause this. Inflation is the first one, but inflation currently is disinflationary in nature, not true deflation if we ignore the junk the BLS has incorporated into inflation reporting. The other scenario is that employers are squeezing more productivity out of the workers who are still on payroll.

This seems to make sense. You want to look good at work, so you don't get shit-canned. One way to do that is to work even harder, for the same shitty wage and the same shitty health care package the company offers and the shitty amount of paid time off they give you.

Also, I forgot to mention the Cash-For-Clunkers Program may have skewed GDP reporting upward due to a temporary increase in the demand for new vehicles. Now that the program has ended, I expect any gains made under this program will evaporate by next quarter.

[FBaggins]

10. Another unexpected factor

Most people don't understand those GDP calculations.

For instance, the trade deficit is a regular drag on GDP... but even though exports have been declining, they haven't been falling as quickly as imports. The impact is actually an upward component to GDP - though counterintuitive to some.

Another surprise to many will likely be the impact of home construction. It has obviously been a significant drag for a number of quarters now. Just leveling out to zero growth would result in a positive change for GDP.

You can see a positive bump up just by expanding inventories - even if the increased sales that they anticipate haven't happened.

Then of course there's the adjustment for inflation. The quarterly GDP figure is "real" (that is - inflation adjusted). Flirt with deflation and it doesn't take much nominal growth to show a positive "real" GDP number.

I suspect that we will see and/all of these factors contribute to a significantly positive Q3 figure (3% or higher)... which doesn't mean that everything is now fine and dandy.

[FarCenter]

4. The bottom 20% of the income distribution only account for about 3% of Gross Domestic Product

Growth of the economy is mainly dependent on those with the top 10% of incomes.

[TxRider]

5. Jobs are usually the last thing to recover from a recession.

Jobs numbers rising is generally the signal the the recession ended some time ago. The end proof as it were.

[Zoeisright]

8. +1

[nadinbrzezinski]

6. Employment is a leading indicator on the way in

and a lagging indicator on the way out.

It is measured through GNP and also the slowing of job losses.

As well as other things like sales of durable goods and things like that.

[DJ13]

7. The government and their owners on Wall Street believe

... that they can create a real recovery by lying about the current state of the economy.

That only goes so far before people stop believing them if theres no substantial improvement for everyone else.

Its the old "pump and dump" Wall Street con writ large.

[FBaggins]

9. Simple. Your last sentence is the key.

It's all in "how it's being measured".

The economists' definition doesn't have to be the same as that of the man on the street (who is likely to agree with Reagan on this if nothing else - a recession is when your neighbor loses his job and a depression is when you lose yours).

In general, the economists will call a recovery when the bottom of the economic cycle has passed. Positive GDP growth is a good indicator, but they also look sat sales, production, income and, employment. You likely won't see the "official arbiters" of cycle dating (the NBER) "call the bottom" until months after it occurs (by which time it will be obvious to everyone and we'll just be debating when it happened).

There's nothing that says that this has to be a "normal" recovery, but if it were, what you would expect would be for the markets to turn around about six months before the recovery begins and for employment to start to pick up about six months after the recovery begins.

[TheKentuckian]

11. Over the last 30 years they have increasingly divorced us from them

as far as economic viability and growth. I've been warning people for a long time that this path is utterly dangerous for the common citizen. This downturn has made the equation even more dangerous because it demonstrated that despite the massive employment hemorrhage that with a cruel whip, that they still haven't cut enough fat to touch muscle much less bone. Despite jobs flying away at the speed of light, the productivity increased by a big chunk.

Some sectors will see growth but overall there is nothing to replace what has been lost in the slow seepage of the last generation and certainly no short term cure for the last years losses. With the productivity actually spiking business has little incentive to hire more than in a piece mill fashion. There is no significant driver of employment coming and hopefully people will get that we almost have no choices other than a flood of government jobs to repair our crumbling everything and/or some pretty damn tough protectionism that we won't be able to generate enough for everyone that is willing to do something and certainly we're a long way from getting everyone something they can build even a basic life from.

We've been baffled with bullshit on how the economy functions in relation to us as individuals. People must grasp and accept that the GDP can be growing by leaps and bounds and the average person could be living in the stone age. We traded the means of production for some bullshit people. One person could about get every dime and the GNP would still grow.

[Ruby the Liberal]

12. Measured? By Goldman Sach's bonus pool.

[sabrina 1]

13. I don't know anything about economics so I go by what I see

which is pretty simplistic, I know. My interpretation is that the Wall St. guys are doing great now that the tax-payers saved their corrupt rear-ends and that means the economy is doing better, for them. The people don't exist as far as they are concerned, so why would they bother their 'beautiful minds' with how the rest of the country is doing?

Who provides these statistics anyhow? If ordinary people were providing them, things would not look so rosy.

[obliviously]

14. It is no different than

global warming with cooler temperatures!

[Tierra_y_Libertad]

15. It's a "trickle-down" recovery with the bankers and politicians doing the trickling.

And, the usual people getting pissed on.

[JonQ]

16. I believe it is called a "jobless recovery"

and is generally not thought highly of. (and I don't care that I ended a sentence with a preposition, it's sunday dammit).

[grantcart]

17. Imagine that you owned a store that sold widgets. Before the recession you had 12 employees

The recession hit your business hard and sales slumped by 50%.

One of your employees retired and you had to let go of 3 other employees. You also eliminated overtime, convinced two employees to cut back to only 3 days a week.

Once busness started to improve you had the employees return to full time work. You started adding back overtime.

Because firing an employee is so traumatic you even spent more time on the floor in order to delay hiring an employee that you may have to get rid of if the recession comes back. During this time you stepped back from the business and realized that 25% of your business was in product that didn't make any money and wasted alot of employee time with complaints, etc. so you get rid of that line of widgets.

Now the economy has come back and everyone is getting lots of overtime, you are more efficient so you are making more profit by doing less and you rehire one employee you laid off.

Your business is now at the point where the recession hit but you are reluctant to hire any more employees because you are afraid that it will be a double dip recession. Statistically your business has recovered but you still have 25% less employees than you did before.

That is a "micro" explanation of why jobs are a lagging indicator of a recovery. Other activities, like ordering inventory, don't have the more permanent impact of hiring an employee, so employers hold off rehiring until they have a confident sense not only of the current situation but also of the growth potential.

Real hiring will not happen until businesses beieve that they will be sacrificing future grwoth and profits because they don't have enought people.

[Capn Sunshine]

18. Things are changing daily-this is long but I hope you get the point

for one thing, the US economy's dependence on consumer goods. That was fueled by easy credit for the most part. The market as a whole IS improving. There are questions of sustainability. To me this means bring on the "happy Talk". So much of the economy is animal based. Front line traders work off this. The whole system is vulnerable to panic. That's animal instinct. Herd mentality. Conversely, there's a whole school of economic naysayers that feed off these declines.

Now I don't know if you were around for the last recession, or the one before that, or the one before that. I was fortunate enough in BSchool to study under some very bright guys who worked for Democratic administrations, like Carter and LBJ. The vogue then was Reaganomics aka Supply-side free market. George Bush the elder once referred to this as "voodoo economics" with good reason. It was smoke and mirrors. It was all a pretext to allow piracy against the populace like Enron or Health Insurance to suck as much capital ass possible out of the system.

What many at DU and elsewhere fail to understand is that fundamentally, the economy is APOLITICAL. Once you understand that the various slathering beasts chewing away at our economy have no politics (or morals for that matter) the easier it is to forecast (educated guess)their behavior and things to come. I wrote a whole thesis on how perception is an underrated key to capitalization rates(The discount rate used to determine the present value of a stream of future earnings, expressed as a percentage. Used to determine a "market value" for an investment) and the howls that went up amongst the Friedmanites, even though their "free market" crap is a function of that very thing, was loud. I mention this because I can't emphasize enough how happy talk plays into things to create more positive attitudes about the future.

Let's not forget that the free market piracy (aka "unregulated") rampant the last ten years, is what led us to this sorry state of affairs and expecting, as many of you seem to, a complete turnaround in 8 months is really naive. So is falling in with the gloom and doomers. Their main function is to inject doubt and fear into capital markets so that they may be exploited.

What is happening today is very similar to past recessions. Real Estate has become cheap enough to run a positive cash flow---something lacking in former valuations. The market, which is basically a snapshot of that days take on the future, is showing signs of stabilization. With a few caveats. Technical indicators and charts postulate there is always a retracement of 50% of the last big sustained upside move. The whys and hows of this are primarily BIG money, but is a normal part of the process.

There have been times when retail sales have lagged recovery; most notably 1970. Unemployment is improving, if you remember it's a lagging indicator. Take this graph from the LA times Unemployment hits 12.2%


This clearly shows that the trend is reversing. THe huge capital injections of the Obama Administration have only begun to stimulate. "Cash for Clunkers" was a huge success. The job formation is coming, as green industry initiatives and infrastructure programs create more jobs less dependent on retail sales as we rebuild the delayed-for-a-generation infrastructure and create sources of renewable fuel. The effects of these have not even begun.

So, I'm optimistic things will slowly improve. IMO we're looking at a "slow job creation" recovery, but the jobs created will be more lasting and less subject to retail sales. Not fast enough for you naysayers, but that's what makes a market. Those of you between 35 and 40, it was this bad when you were born, yet your parents still had you! Those of you between 25- 30, things have been te suck before. We always came out stronger. Those of you under 25, I love you all, just believe in the future. Never has there been a better opportunity to mold the country the way you want it to be, and the opportunities in a downturn are manifold.

We just have to fight the bastards at every turn, because they never give up.

[Capn Sunshine]

20. and I didn't even mention

the tremendous boost to the economy if we ever get true Healthcare reform, or stop blowing 60% of the budget on defense from no one

[flying rabbit]

21. Thanks for the perspective n/t

[unblock]

19. economic recovery almost ALWAYS precedes job market recovery

economic recovery simply means gdp is finally increasing, however slowly. that doesn't mean in every industry, that doesn't mean by a lot, and that doesn't mean it's happening along with hiring.

once companies have confidence in the economy and see that they can expand and hire and still make a profit, they will do so. so job losses tend to continue for 6-9 months after the recession is officially over.

what fuels the recovery depends. in this case it might be foreign countries like china. but other times it has been the consumer, notwithstanding a lousy job market. that's because while high unemployment sucks, it mostly sucks for the actual unemployed, which still leaves a large percentage of job seekers employed and able to consume. government stimulus and monetary/banking policies also come into play, permitting people to borrow more to help bring the economy around.

obviously, that last tool can be used imprudently....

[anigbrowl]

22. Recession/recovery is based on 2 quarters of positive/negative change to aggregated output, ie GDP

Employment always follows behind, not least because you have to bank the improved profits from greater output in order to be able to afford to hire new people.

Also, you rein in a horse. Reigning is something kings and queens do.

[AdHocSolver]

23. You are too logical. Remember what Humpty Dumpty said...

"When I use a word," Humpty Dumpty said in a rather a scornful tone, "it means just what I choose it to mean – neither more nor less."

So, when an economist, or an entire coven of them, tells you that increasing unemployment, increasing housing foreclosures, reduced consumer spending, and don't forget an increase in the number of people who can't afford health care, means economic recovery, who are you to argue the point.

The only "recovery" of concern to the powers that be is the temporary boost to the stock market provided by the hundreds of billions of dollars of bailout money given to the "banksters". The assets of the financiers, speculators, and Ponzi scheme operators has been saved.

The real economy will not recover until most of the jobs that were offshored during the last ten years are returned to the U.S.