U.S. Still Stuck in Recession
This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published June 22, 2012 on The Washington Times website.
This latest recession started in December 2007. Since the Great Depression 75 years ago, recessions in America have lasted an average of 10 months, with the longest previously lasting 16 months, not counting this latest spooky downturn.
The National Bureau of Economic Research, the recognized scorekeeper of recessions, declared this latest recession over in June 2009, which would make it the longest recession since the Great Depression. The historical precedent in America is the deeper the recession, the stronger the recovery, as the American economy accelerates to return to its long-term trend line. Based on that precedent, we should be in the third year of a raging recovery boom by now. Instead, we have suffered the worst economic recovery since the Great Depression under Obamanomics.
Unemployment was actually higher for 18 months after the recovery supposedly started. Instead of recovery, America has suffered the longest period of unemployment above 8 percent since the Great Depression under President Obama’s public policy malpractice. Even last month, 53 months after the recession started, the economy created a mere 69,000 new jobs, with unemployment rising again to 8.2 percent. The May Bureau of Labor Statistics (BLS) report adjusted downward the jobs created in March and April by 49,000, leaving a net of just 20,000 new jobs. The number of jobs created has declined every month this year.
The labor force is actually 365,000 workers smaller today than it was in June 2009, when the recession supposedly ended. Counting population growth since then, the economy is actually missing 7.7 million workers that would be in the workforce if the labor force participation rate had remained the same since the supposed end of the recession three years ago.
As Investor’s Business Daily reported on May 7, “That’s in stark contrast to every other post-World War II expansion, which saw the labor force climb by millions at this point in their recoveries, even as unemployment rates were driven down.” Indeed, if labor-force participation had stayed the same as it was when the recession supposedly ended in June 2009, the unemployment rate would be 11 percent, as Investor’s Business Daily also reported on May 7. That is a more realistic number because those millions of workers missing from the workforce still exist and still do not have jobs.
That is the only way the unemployment rate has been falling – working people giving up and dropping out of the workforce. As the Wall Street Journal reported in its weekend edition of May 5-6, “Nearly three years into the [Obama] recovery, the U.S. still employs 5 million fewer workers than before the recession.”
The creation last month of 69,000 new jobs, or 20,000 on net, under Obamanomics can be contrasted with the 1.1 million jobs created in one month alone in September 1983 in the first year of Reagan’s recovery.
Moreover, as the Wall Street Journal also noted on May 5-6, “Even as employers added jobs last month, full-time employment actually fell by 812,000.” The BLS reports that for last month, the number of involuntary part-time workers totaled 8.1 million, saying, “These individuals were working part-time because their hours had been cut back or because they were unable to find a full-time job.”
As a result, the BLS reported that in May, again, 53 months after the recession started, the total unemployment rate – counting the unemployed and involuntarily underemployed – increased again, to nearly 15 percent. That’s persistent depression-level unemployment. The Shadow Government Statistics website, which includes the long-term discouraged workers the government hasn’t counted since 1994, reports the total unemployment rate at 22.3 percent. That’s what the total unemployment rate would be if it were calculated the same way as before 1994.
While economic recovery is long overdue, several factors indicate worsening job trends and long-term decline for America. Last month’s jobs report indicated another increase, to 5.4 million Americans suffering long-term unemployment for 27 weeks or more, double of when Mr. Obama entered office in January 2009. Moreover, the median length of unemployment is now 19.4 weeks, which is also nearly double compared to when Mr. Obama entered office. Instead of a long-overdue recovery resolving unemployment, a half-million more Americans are unemployed today than when Mr. Obama became president.
In addition, the Census Bureau reports long-term declining real wages and incomes and more Americans in poverty today than at any time in the more than 50 years that the census has been tracking poverty.
Obama apologists argue that the usual standards for recovery from recessions do not apply this time because this recession was a “financial crisis” and recovery from that sort of crisis takes longer. But this does not reflect the historical record for America, as reported above.
A recession is clearly defined as two consecutive quarters of negative economic growth. What defines a financial crisis rather than a regular recession – a newspaper headline? Recessions are always accompanied by turmoil in financial markets. The financial-crisis excuse is just political propaganda to give Mr. Obama a free pass for his failures. It’s not based in economics.
In a Wall Street Journal commentary in February 2009, I noted that the emerging Obamanomics was following the exact opposite of every policy of Reaganomics in great detail. I predicted that it would consequently get the exact opposite results. That is what has happened.