It was interesting, in a driving-by-an-auto-accident way, to watch much of the mainstream media react to Friday’s low jobs numbers. Suddenly the recovery was off! In reality, nothing has changed. This is still a very fragile economy.
Hiring remains uneven, and even during the mini-boom of adding 250,000 jobs a month, many of those positions were of poor quality. Government continues to cut jobs, which is especially harmful to women and minorities. This is a big difference from the recession and recovery during the Reagan years, when government hiring continued to grow. Indeed, this is the first of the past four recessions when government actually shrank. Unfortunately the private sector isn’t picking up the slack.
The pullback in the stock market shows how little conviction was behind this rally, particularly now that it’s clear the Fed won’t be further expanding the money base. In addition to slow growth in America, Europe still remains troubled, pushed into recession by “austerity.” Demand remains weak. Consumer spending has its limits when most consumers are limited by poor wage growth and high debt. Higher oil prices are a worry — and when they’re not it’s because the economy is slowing further.
So this is not your typical post-World War II recession and recovery. The business cycle is weak. Most people aren’t benefiting from the upswing. Although big companies are continuing to enjoy big profits and record cash, it’s not translating into the kind of hiring we need to make up for the job losses from the Great Recession. And housing is unlikely to return to 2006 levels for many years. So pay no attention to the boomlets of “we’ve turned the corner!” We haven’t.
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Today’s Econ Haiku:
AOL brain dump
Microsoft picks up patents
Redmond, you’ve got mail