Thursday, July 03, 2003

Looks like The Maestro was wrong again.

What Alan said: "the U.S. economy is poised to grow at an annual rate of 3.5 to 4 percent through the end of next year, the Fed chairman said. That should bring the current 5.9 percent jobless rate down to 5.25 to 5.5 percent by late in 2003, according to Fed policymakers' forecasts, he said." (Washington Post, 17 July 2002, p. A1)

What happened: "In a bleak start to the Fourth of July holiday weekend, the government reported today that the nation's unemployment rate climbed to its highest level in more than nine years during June. . . . The unemployment rate, which stood at 6.1 percent in May, jumped to 6.4 percent in June. The jobless rate has not been this high since April 1994. This was the biggest month-to-month increase in unemployment since immediately after the Sept. 11, 2001, terrorist attacks."

Let's take these figures with a grain of salt, however. First, remember that folks who have given up looking for work are not included in these numbers. Second, remember that the Department of Labor is cooking the books on unemployment figures, making them look lower than they really are. 6.4% is bad enough, but it's not the whole picture. The whole picture is worse.

Perhaps the Masters of the Universe will soothe the wounds of the working class with the "jobless recovery" mantra -- "Hey, you're out of work, but GDP went up 2.7% last quarter as more Americans got divorced and had cancer surgery!" In fact, it now appears that "jobless recovery" is the post-Fordist norm. Ever since the collapse of the post-WWII social pact in the US between industrial capital and organized labor in the late 1970s (codified under Reagan) recoveries have been "jobless".

This is as true for Poppy as it is for George Jr. The Poppy Bush recession began 1990:III and it took until 1991:IV for GDP to recover in real terms. At the start of the Bush I recession, unemployment stood at 5.9%; it took until September 1994 for unemployment to be that low again -- about 33 months between GDP recovery and employment recovery. By comparison, employment recovery from the Reagan recession was downright rapid. The Reagan recession began in 1981:IV and it took until 1983:II for GDP to recover. At the start of the Reagan recession, unemployment stood at 8.5%; it took until November 1983 for unemployment to be that low again -- about 6 months between GDP recovery and employment recovery.

So far for Jr. it has been about 18 months since GDP recovery. In 2001:I unemployment was 4.2% and it's going to take a hell of a long time to get back to that kind of territory. If Jr. is anything like his Daddy, US employment will recover around 2004 election time -- how convenient!


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