We were softened up with 'double-dip' recession stories so that the latest jobs report would seem less dire than it really is.



The September jobs report showed that the US economy created just 103,000 jobs in the month,
45,000 of which were the jobs of Verizon workers who were returning
from a strike in August. The economy has created 99,000 jobs a month
over the last three months, about 9,000 more than it needs to keep pace
with the growth of labor force. At this pace, it will be around 80 years
until the economy gets back to normal levels of unemployment.Nonetheless, the news accounts told the public that the jobs numbers were better than expected. After all, at least the number of jobs is growing; the economy has not sunk back into recession.

Of
course, slow growth is better than a recession. But this is like saying
that we are better off with one major hurricane hitting the east coast
rather than two. This is true, but why would we expect that two major
hurricanes would hit the east coast in the same year?This is the
same logic with the double-dip recession story. In the last several
months, many economic analysts have been running around with scary
stories about a double-dip recession. While the stories were scary, they
never made much sense. Every recession that the United States
has had since the Great Depression has been triggered by a plunge in
housing and car sales. It is very difficult to imagine sharp falls in
either of these sectors at this point – primarily because current sales
levels are already very low. At worst, we could see a modest downturn in
one or both sectors, which would have a limited impact on the economy.By
contrast, other sectors of the economy are growing, albeit very
modestly. Consumption, which is 70% of GDP looks to be on a 2-3% growth
path over the second half of 2011. Investment in equipment and software
is likely to grow at close to a 10% annual rate. Government is
shrinking, but only at a 1-2% annual rate; this slows growth, but since
this sector is only 20% of GDP, the shrinkage in government is not
nearly large enough to turn GDP negative. With one exception,
there really is not a plausible story whereby the US economy goes into a
second recession. The exception, of course, is the meltdown of the
eurozone from a disorderly default of one or more of the heavily
indebted countries. But this outcome will be determined by the greed and
ineptitude of the IMF, the European Central Bank and the European
commission, the troika managing negotiations with the debt-troubled
governments. The current strength of the US economy has little direct
bearing on the willingness and ability of the troika to bring about an
orderly resolution of the crisis.The spread of the double-dip
nonsense matters because it provides a backdrop against which
politicians and the media can tell us that we somehow should be happy
about really bad economic news. By lowering expectations enough, even
the pathetic September jobs numbers can be made to look good.This
is not the first time the media have played this game. At the start of
the downturn, we had any number of political figures and "experts"
telling us that we were at risk of a second Great Depression. This line
was so constantly repeated that most of the public probably thinks it is
true. In fact, Ben Bernanke, who is, after Alan Greenspan, the person
most responsible for the economy's collapse, was actually named Time Magazine's Person of the Year in 2009, precisely because he prevented a second Great Depression. Of course, he also prevented a return of the Black Death.In
reality, we never had any reason to fear a second Great Depression. The
first Great Depression was caused not just by mistakes in responding to
the financial crises at its onset, but also by the failure to provide a
sufficient boost to demand to get the economy back on its feet again.
The massive stimulus provided by the second world war that finally
restored the economy to full employment could have just as easily
occurred in 1931 as 1941, if there had been the political will.There
is nothing magical about war spending that generates jobs. Spending of
the same scale on public works, public education and public health would
have had the same effect. We know this now, which is why there was
never any reason to think that a bad turn of events in the 2008
financial crisis would have condemned us to a decade of double-digit
unemployment.Political figures routinely use the media to create
absurdly bad counterfactuals so that their actual performance will look
good by comparison. Economics reporters should know how to evaluate
arguments so that they don't pass along these nonsense counterfactuals
to the public. They should also not make a point of relying almost
exclusively on economic experts who end up being wrong on almost
everything.Unfortunately, we are far from that point today. As a
result, people will have to do their own homework to recognise that the
September jobs numbers really were awful – and that they should be very
angry at politicians who refuse to do anything to boost the economy.