Here’s your “recovery”: According to a new report, half of America’s counties still haven’t returned to their pre-recession levels of output. This despite the overall national economy reaching that mark three years ago.More
Two charts from the St. Louis Fed help explain at least partly the disconnect of our so-called recovery:
Note that total U.S. output has rebounded from the recession and even surpassed its pre-recession high.More
A very slow and unevenly enjoyed recovery is threatening to turn into a double-dip, and not just in Europe. The banking system is still dangerous. Bad incentives deploy too much capital into gambling instead of creating and expanding job-creating enterprises. So-called consumers are wary and many are financially ruined and/or in debt, many have seen barely any increase in wages. Europe is not fixed. The United States is too paralyzed to fix itself.
Some new normal. So how long do you think it will take for the economy to recover?
Read on for the best links of the week and the haiku:More
Today the government reported that initial claims for unemployment fell by an unexpectedly large 27,000 to 365,000. The trouble is, we don’t really know what this means. More discouraged workers may be dropping out of the labor force and some states are cutting back jobless benefits. Challenger, Gray & Christmas said that jobs cuts rose 7.1 percent last month 40,599, up 11.2 percent from last April. According to the Economic Policy Institute, the state jobs picture, while still mostly positive, indicates slowing. Also, continuing government job cuts are disproportionately hurting women and minorities.
The more interesting report came from the Institute for Supply Management, whose index of the vast service sector fell much more than expected, to 53.5 in April, down from 56 in March and the lowest since November. Bloomberg notes, “Expansion among service industries may be moderating after a surge in the first quarter that coincided with the strongest pace of job growth in six years.”
The political ramifications of even slower growth aren’t as important as the continued misery for millions of Americans.More
Jobless claims are moving higher and new reports show weakness in manufacturing and (continued) problems in housing. The Wall Street Journal wonders if the economy faces a “spring stall.” You can’t count on it, but you can’t count it out.
The European crisis is getting worse again. China has slowed down. At home, one of the biggest problems is continued job cuts by government. The closest event to the Great Recession was the 1981-82 recession. But coming out of that, the Reagan administration spent big to raise public-sector employment. States hadn’t been hobbled by 30 years of tax cuts and tax limitation measures. This time, the public sector has lost nearly 200,000 jobs and, the Economic Policy Institute argues, those “these extra government jobs would have helped preserve about 500,000 private sector jobs.”
A housing recovery won’t come until at least 2020, one more reason to pivot the economy away from its dependence on this sector. Another problem: The jobs that have been created since the end of the recession have disproportionately gone to those at the top and bottom of the income range. Those in the middle have been left behind.More
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.More
It’s not just psychology. Here are the latest Census numbers analyzed by Sentier Research: Median household income fell 6.7 percent to $49,909 between June 2009 and June 2011 when the economy was allegedly in recovery. That compares with a decline of 3.2 percent to $53,518 during the 2007-2009 recession. The numbers were first reported this morning in the Wall Street Journal.
These stunning numbers show how many people were financially ruined by the crash and that the economy isn’t growing fast enough to repair the damage. Too many are un- and underemployed, underwater on mortgages, foreclosed and/or stuck in jobs where pay is stagnant or has actually been cut. The private debt overhang remains enormous. Is there any wonder there’s anger on the part of Americans across the political spectrum (favorable rating for Congress: 9 percent)?
With no stimulus coming from D.C., the Federal Reserve at odds, the private sector doing little hiring and states and localities continuing to cut back, there’s little reason to expect this trajectory to change any time soon.More
I’ll call your attention to Harris Collingwood’s article in The Atlantic: “The recovery’s silent assassin: How debt deleveraging is killing the economy.” It points to a little-discussed phenomenon after three decades of debt-driven growth: As households, businesses and governments pay down debt at the same time, the economic crisis will only linger and perhaps get worse. This isn’t the only problem facing the economy, but it’s a big one.
Using one woman’s life changes as an example, he writes:
Millions of Americans are taking similar steps. Some 8 million U.S. consumers stopped using bank-issued credit cards in 2010, according to the credit-reporting agency TransUnion. The average credit-card balance has fallen 10 percent this year from 2010, to $6,472; U.S. consumer debt has dropped for 12 consecutive quarters, from a peak of $14 trillion in early 2008 to $13.3 trillion last spring, mainly because of mortgages repudiated or abandoned. People are cutting visits to the hairdresser, buying used cars without financing, and living on surplus cheese as they trudge toward the promised land of a debt-free existence.
Suppose everyone did what Heather Anderson is doing? And that the federal government, just as virtuously, did the same? And Europe too? What if everyone deleveraged at once? Guess what–that is exactly what’s happening in the wake of the Great Recession. For better or worse.More
Today’s selloff on Wall Street is only the beginning of what we should expect from September. The global economy is slowing. The American economy is close to a double-dip recession or is still in one, the old-fashioned metrics no longer useful. Europe is a mess: Behind the so-called sovereign debt crisis are big banks that made bad bets (sound familiar?), and a monetary union on the brink. As the nest-eggs of average Americans evaporate, there’s only so far they can max out the credit cards to keep the vaunted consumer economy going.
Austerity will only make things worse, as has been happening in Europe. Nobody expects a bold move on jobs from President Obama, who is looking more and more like a one-termer no matter what outrageous things are said by the GOP field, especially the front-runners. Obama, a creature of Wall Street and Robert Rubin’s obsession with pleasing the bond playerz, will only add to the rolls of jobless as public-sector jobs continue to be eliminated.
None of these issues can be addressed quickly anyway. That is, even if our leaders were speaking truth to the American people and taking serious measures.More
People of a certain age remember the Misery Index: It combined the inflation rate with the unemployment rate. Candidate Ronald Reagan used a high of nearly 22 percent in 1980 to highlight the economic failures of Jimmy Carter and win the presidency. Although President Obama’s rate by the old measure is a little more than 10 percent, a shrewd Republican challenger would be working on a new Misery Index.
It will take some work, because it should include the real unemployment rate (16.7 percent) plus several other critical measures: Long-term unemployment, loss of household wealth due to the real-estate crash and damage to average investors’ holdings from the Great Recession; stagnant or falling wages for most working Americans; the percentage of the population on food stamps, poverty rate, etc. A big part of this yardstick would be capturing the de-facto deflation that has hurt millions of households. Together, it would be a staggering number.
Today’s national unemployment report is dreadful: 18,000 jobs created in June, 250,000 more people dropped out of the labor force and average hours declined. Only 25 percent of American teenagers have summer jobs, the lowest rate on record. May’s data were revised downward, meaning two straight months of less than 25,000 net new jobs. At 58.2 percent, the employment-to-population ratio matched its lowest point in the downturn. As economist Heidi Shierholz of the Economic Policy Institute put it, “Virtually every single measure was devastatingly weak.”More