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Economists are all saying the recession is over. They point to a growth in the gross domestic product and an increase, at least when compared to last month, in retail sales. Even automobile sales improved slightly. And then there is the modest uptick in home sales. All of this sounds encouraging, and it should be, but it still doesn’t feel like the recession is ending. If anything, it seems unusually persistent and sometimes like it’s actually getting worse.
Perhaps the most telling indicator is unemployment. Contrary to what some have said, we have had higher unemployment levels since World War II. In 1982 unemployment reached 10.8 percent. However, now that I have written that, knowing that 27 years ago things were slightly worse doesn’t make me feel that much better. That 10.2 percent, or roughly 15.7 million people, is a lot and at the moment it’s hard to see how that number is going to come down anytime soon. Also, when you add in the Labor Department’s measurement for folks who have been unemployed for an extended period and have pretty much given up, and people who are underemployed, that 10.2 percent statistic gets much larger.
There are several reasons why unemployment, in spite of the modest bits of good news, is still stubbornly so high. It is, as economists refer to it, a “lagging indicator.” There are leading indicators, coincident indicators, and, yes, lagging indicators. Unemployment is one of them. Usually, even when sales improve, businesses aren’t necessarily eager to add new employees to the payroll until they’re convinced that the improved conditions are going to last. At the moment, with good cause, prospective employers aren’t rushing out looking for workers.
Additionally there is the availability of credit. Credit for any kind of expansion, or for any purpose for that matter, is hard to find. Small businesses in particular, and especially those who were used to borrowing to cover seasonal downturns, often making up the money later during their good months, have been hard pressed to get access to their normal lines of credit. This often means the only option is to let employees go.
Also, several sectors were so hard hit that a quick rebound isn’t likely to occur anytime soon. The recession was heavily focused on the construction and real estate sectors. New housing starts, commercial and residential, are all still way down. This means that a large number of people are hard pressed to find work. This includes not only the visible workers in the construction industry, like carpenters and bricklayers, but also a host of industries that make up the construction supply chain. Add to that all the real estate agents, mortgage brokers and even settlement attorneys and you’re talking about an industry with an incredibly large reach.
The same can easily be said for the U.S. auto industry. Its near collapse last year, and the bailout by the government, has permanently changed America’s industrial landscape. This has affected hundreds of thousands of workers.
The bottom line to this story is that before we see a significant recovery we’re going to also have to accept some significant restructuring in the American economy. This won’t be all bad. New industries, such as a host of green sector enterprises, are gaining steam. The stimulus package invests heavily in these new sectors, but it’s going to be a while before they start to affect some of the tougher pockets of national unemployment.
There is one odd statistic that may at first seem surprising, but it says a lot about our current economic situation. Individual worker productivity last month actually went up. What happens is that when companies cut back they are often obliged to ask for more work from those employees still on the payroll. Anyone working for a local company that’s downsized can probably relate to this.
None of this is good news at Christmas time. A lot of people in our community are hard pressed. Others are worried about keeping the jobs they have. But, it’s worth noting that historically, even in the face of significant challenge, our economy has historically proven more resilient than any other in the world. We’re a dynamic and enterprising people. There will be better days.
You may reach David Kerr
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