Reading Tea Leaves

Some notes here on the last release of employment numbers. First, my habit is to contrast employment gains (2010-current) with employment losses (2009-2008). Doing so we have recovered 45.3 percent of jobs lost. But, as I pointed out a short while ago (link), we should also count growth in the labor force—in addition.  I showed there than we need to generate 87,300 jobs every month just to account for the increasing labor force. In the 2010-current period, that totals to 2.7 million jobs (31 months’ worth). These have to be added to the 8.7 million jobs lost in the Great Recession. This means that we have to produce 11.4 million jobs—and we have actually recovered 4.7 million. Therefore our recovery, thus far is at 41.2 percent, not 45.3.

As the period of the “recovery” extends—it is more than 2.5 years old—and no even perceptible upward thrust is present in the numbers, this phenomenon appears to signal something new. Our habit is to view recessions are recurring cycles of brief decline followed by resumption of growth. That isn’t happening this time.

Reading tea leaves is difficult. Suppose we see recessions as occasional hangovers from too much boozing. If that’s the case, the last recession was certainly a hum-dinger. Are we to see this sluggish response of the economy as something more than just getting back to normal? As, perhaps, a kind of wide-spread reform? It would be ironic indeed if the public has decided to come to its senses and stay off the bottle, this time. It would be interesting to look at “recovery” not as the resumption of our spendthrift ways but as a genuine recovery from them. In that case, and in due time, other changes will necessarily evolve. Among them? Well, we do have to employ the population. Will we, of necessity, accept lower compensation in the future? And will “insourcing” replace outsourcing as a new trend—in due time echoed by legislation and incentives to make it happen faster? The longer this lasts the more I will wonder.