Krugman agrees with America Doomed that this so-called recovery will be ‘jobless’ and this makes it no recovery at all. But, there is an even more important reason that the recession is not over — the economy is still way down from its peak.
Consider the way America defines a recession. Once the economy begins to contract for two quarters they retroactively determine the start of the recession. This is months and months after the recession actually starts — as a result, the “experts” will say how the recession is just about over. Then, they declare the end of the recession with the first quarter of uptick in the economy. It doesn’t matter if the economy was down 20% and then up 1/2% — the recession is over. The experts say with the first uptick in the economy, the economy is expanding again — perhaps it is but so what — it might take a decade to actually recover and start really expanding. The current definition of a recession is a highly misleading metric and intended to manipulate the public.
Recessions should be define in terms of jobs. A recession is not over until the number of jobs surpasses the highest level in the country. So, if the country loses 15 million jobs and enters a recession, then it won’t be over until those 15 million jobs come back. This is what a rational person would use for the definition of a recession — just wait until you get back to the same point you were at when the decline began.
Stock portfolios are valued rationally. Nobody ever declares that things are good with the first uptick after a big decline. If your stocks drop by 20% then it makes little difference when it upticks 1% — sure, you might be happy the decline has stalled but that’s about it. The real milestone is when you recover the entire 20% loss. You haven’t made any money yet but at least you have recovered your losses. You are now in a position for growth. You would never say you made money just by recovering previous losses. Yet, that is exactly what is said with the traditional definition of recessions. The country could lose 10% and gain 1% in one “recession” after another and the country would be self-destructing.
So, expect the experts to declare the recession is over soon — recovery has begin — hurrah! — bring on the excessive compensation and bonuses. Yet, they are deliberately misleading everybody and all those people who are still out of work knows it full well.
America is doomed.
its funny that you should write this article about job creation being necessary for a real recovery. I have been working on a book lately and I made a similiar point. By definition, a recovery is defined as getting back what was lost. Until we get back all that was lost then it is no recovery. We have already lost nearly 6 million jobs in this ‘recession’ and Obama speaks of creating 4 or 5 million new jobs…Well guess what losing 6 and regaining 5 is not a recipe for success.
Incidentally, I did some job calculations on job growth since 2001 (as part of my research) and found that the United States is about 10 million behind in job creation. That is to say there have been around 10 million more people entering the work force than there have been jobs created. So, recognizing that every year we need to add around 1.5 million new jobs just to keep up with population changes then just to employee the backlog of workers and keep pace with the additions to the workforce we would need to do the following:
create 16 million jobs in the next four years(ie a pace roughly 25% higher than during the 90′s dot-com boom and 45% higher during Reagan’s ‘Morning in America’)
OR create 24 million jobs in the next 8 years(ie a pace better than the clinton era)
In short, we would need major big time economic booms just to stem the increases in joblessness and poverty.
Tall orders indeed especially as the ADP employment report promises another 470,000 lost jobs for the june report.
[...] a more rational definition of a recession and this one is going to last for decades. Eventually, American capitalism will be dismantled. [...]