It’s a rhetorical question , I know, but really, when the head of the Federal Reserve continues to claim that high unemployment will “persist” why does he also say the economy will continue to recover?
The pace of the US economy “will pick up in coming quarters,” but the relatively high unemployment rate will decline “only slowly” because of “headwinds,” Federal Reserve Board Chairman Ben Bernanke said Wednesday. […]
Given the expectation of modest economic growth, the Fed is projecting that the nation’s jobless rate will return to normal levels “albeit only slowly,” Bernanke said. The unemployment rate hit 9.2 percent in June, and the Fed expects it will end 2012 in the range of 7.8 percent to 8.2 percent.
The headwinds that Bernanke cited as slowing the economy included slow growth in consumer spending, the depressed condition of the housing market, and cuts in spending by all levels of government.
Bernanke also claimed the following:
“The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending in the medium run,” he said.
I am not an economist but when people are being laid off right and left and the “official” jobless rate is still in excess of 9%, I don’t call that a “recovery.”
When families lose their health care and half to work two or more jobs just to pout food on their table and pay their rent, I don’t call that a “recovery.”
When prisoners are being used to replace state government workers, I don’t call that a “recovery.”
When food and energy prices keep rising at rates that far exceed the “official” inflation rate, I don’t call that a “recovery.”
When new college graduates face the worst hiring market I can remember, I don’t call that a “recovery.”
When state governments furlough employees or, as in the case of Minnesota, shut down their government, I don’t call that a “recovery.”
When even in this weak economy we are still running a $500+ Billion Dollar Trade Deficit, I don’t call that a “recovery.”
When small businesses are still suffering due to tight credit, and new small business formation and IPOs are declining, I don’t call that a “recovery.”
When US companies continue to outsource jobs overseas and experts predict that by 2015 “U.S. employers will move 3.4 million white-collar jobs and $136 billion in wages overseas,” I don’t call that a “recovery.”
When the US banking sector is seeing a decline in revenues, I don’t call that a “recovery.”
When more people are falling out of the middle class than entering it, I don’t call that a “recovery.”
On the other hand, if I were a senior executive making more money this year, maybe I would call it a “recovery.” For me, anyway.
But, I’m not one of those lucky duckies at the upper 1% of the economy’s food chain. I don’t earn a seven figure income, much less a six figure one. So, my question remains, if 99% of the people are merely treading water at best, or at worst drowning in an ocean of economic hardship and misery, how can anyone say our economy is “recovering?”
I guess you have to be the Chairman of the Federal Reserve (or one of his ideological and well-off buddies) to utter those words with a straight face. I know I sure can’t. I bet you can’t either.
Welcome to econospeak.
When an economist says the economy, he/she means that network of flows of goods and services in one direction and money in the other. That is generally measured by production. That bete noir: GDP
Production can be up, and if productivity per labor hour is up at a higher rate, employers can be laying off workers. “Labor-saving” capital equipment can dramatic up productivity per labor hour.
“headwinds” is an aeronautical analogy and plain out bs unless he says what those headwinds are like:
Dropping consumer demand
Real business investment on the sidelines
Reduced government spending
Negative balance of trade
Outsourcing (that improves “productivity per labor hour” in dollar terms even if there are more labor hours involved)
Increased investment in labor-saving capital equipment (such as retail self-service checkout scanners)–BTW always have the human being check you out; it preserves their jobs.
Then, you have to realize what the bottom line of the Fed Reserve Chair’s job is. His job is to make sure that the money supply is just the right size to handle the production that is going on. Too large a money supply–inflation. Too small a money supply–deflation. Across the board. With all the easing that the Fed has been doing, the only reason we do not see inflation (supply-demand imbalances in commodities like oil and structural supply-demand imbalances like health care providers are not inflation). The only reason we do not see inflation is that corporations have put trillions of dollars into buying government debt; that is, there are trillions of dollars sitting on the sidelines.
Production is increasing, slowly, but not at a rate to justify more than making existing workers work harder. There is minimal hiring here and there that then gets jerked back because other economic enitities (business or government) decide to cut costs by laying off people.
Essentially until the 2010 election, the economy was moving sideways. And now within the next three or four months, the effects of state and local layoffs will start to be seen. And not long afterwards, the effects of federal layoffs and cancellations of federal contracts.
It is econospeak that is stupid. It deliberately does not take into account the effects on human beings. Well, there is a specialty of economics that does; it is called “welfare” economics. Once an descriptive word, “welfare” has been demonized so much that there are few welfare economists visible to the public.
Given the stalemate in government, it is business corporations that are going to have to risk money in restarting the economy when they get tired of the downturn. But right now they are capturing all of the profits of the “recovery”. At some point they will have so many assets that they don’t know what to do with them.
It is not farfetched (with no J. P. Morgan around to be scared of a meltdown and get agreement in the market) that we could see two bubbles with no job recovery in between.
Barbara Tuchman wrote a book whose title applies to the current global economy: The March of Folly
Ever been really, really sick, Booman?
Like, sick enough to be admitted to the hospital for a few nights?
You can be recovering and still feel like crap. You can be recovering and still actually be in danger of dying, as your strength comes slowly back and you need to be kept alive with serious treatment.
address to author, Mr. Steven D.
You can be recovering and head into relapse because individual parts of your body start shutting down. Your Minnesota, for example.
The economy is recovering because corporate profits are going up. When profits and share prices are up, “happy days are here again.” At least according to these Goldman Sachs types.
But if those profits never leave Wall Street, it’s the start of the next bubble. Trading assets only goes so far before it collapses.
I know that, but they don’t or else for the umpteenth time they believe,”But it’s different this time.”
It is because recovery is measured in GDP and in Dollars.
GDP cares only about quantity of economic activity, not quality. Quality = actual wealth creation (= stuff) as opposed to, say, purely consumptive behavior or the movement of $$$. GDP is boosted regardless of if the seed corn is planted or eaten. GDP policy primpers will take a full belly today vs. the sustainable method of going light for now with the promise of a bountiful harvest next season.
Measuring growth in $$ terms also ain’t so hot. When you get vast credit expansions like over the last decade, asset prices get boosted into speculative territory and related GDP confuses transactions on inflated asset prices for real growth. Hence, all the money shuffling confuses what’s really measured.