Not the best of news…

Posted: September 3, 2011 in Economy, Uncategorized

So. The jobs report came out, and we had a net zero jobs created in the month of August. Zero. None. Nada. To top that tidbit, average hours worked (a metric that reflects overall economic output via both the number of people on the job and the hours they put in) also declined in August. Average hourly pay also declined, and the housing market is still dragging.

I know everyone has been trying to put a positive spin on things over the past few years, calling this a “jobless recovery” while we hear of companies raking in record profits and driving economic growth figures up. The problem with this is that the economic growth was almost entirely dependent on gains in efficiency. While this did push up economic output and growth figures, it was never going to be sustainable. There’s only so much a company can do to increase efficiency, and we’ve pretty much hit the limit. The reason that these gains are unsustainable is that to continue to generate economic output, companies need to generate revenue. As more and more people are laid off and cannot find work, they stop buying things. Those people who still do have jobs see this, and decide that it’s a safer bet to hold onto their money and also not spend.

The end result of all of this is that we are in serious danger of slipping into another official recession. In all reality, we never emerged from the 2007-2009 (or whatever the official dates were) recession. All the talking heads say that the economic growth and output that businesses generated met the empirical criteria for emerging from a recession, but in my personal opinion those metrics are not a true or accurate representation of things. It could be a chicken vs. egg thing, but unemployment is not only a cause of a recession but also an effect of a recession. If a recession is a lack of economic output/growth, one of the causes could be a lack of purchasing power due to high unemployment. Yet that same lack of output causes companies to not be able to afford to hire or retain employees, thereby laying them off and furthering the reduction in purchasing power. So my argument is that any measurement of whether a recession exists or has ended absolutely must include a measurement of employment. It doesn’t matter how much profits are being generated if more and more people are finding themselves unemployed. If consumers have confidence that their jobs are secure, that breeds willingness to consume. A lack of confidence leads to a drop in spending activity, which leads to diminished revenues, which leads to more layoffs, and so on and so on. In short, we never exited the recession, and until there is serious and continuous upward movement on job creation, we will remain in a recession.

  1. Karla Porter says:

    Not only flat in August but projected to be 9% through 2013 and 6% through 2016. My take on it is here:

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