Friday, February 4, 2011

A Jobless Recovery

The news that unemployment dropped to 9.0 percent last month is actually terrible news--for America and for the Obama administration. It means that the economy, now in a mild recovery for the last two years, still hasn't started to generate new jobs.

Back in the early days of the recovery in 2002 and 2003 after the tech bubble recession, Democrats like Nancy Pelosi would howl about the "jobless recovery." Now it's the Republicans' turn to howl, and Rush Limbaugh, for one, isn't slow to do so. You can see the situation from these two charts. The first one shows the US labor force for the last ten years.

It shows that the labor force is flat, continuing the flatness of the past three years. The second chart is total US employment for the last then years.

This shows the staggering bloodletting in the Great Recession. It shows we are still down nine million jobs from the peak of the economic cycle in 2006-07. It shows that the Democratic whining about a jobless recovery 8 years ago was ridiculous. In 2003 the labor force was climbing strongly, as people came into the labor force, and employment was climbing moderately. Contrast that with the current recovery, in which the labor force is flat, and the employment gain is also flat, and down nine million from four years ago.

Of course, conservatives have a simple explanation of the jobless recovery. President Obama and the Democrats thought, back in 2009, that all they had to do was pass a stimulus bill and jobs would magically appear. That's what Keynesian economics told them and that's what their tame economists told them.

Unfortunately, Keynesian economics is baloney. The government needs to keep its hands off the economy. It needs to promote a healthy credit market, which it has not done for the last century. And it needs to promote a healthy business climate, which it has not done from the start of the Obama administration.

If there is a good thing about all this, it may be that the overall losses to Democratic power in 2010 and 2012 will be so severe and so shocking that Democrats will abandon their inflationism, their interference in the credit markets, and their faith in Keynesian economics and come, grudgingly, to accept Reaganomics. But don't hold your breath.

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