Much news about the economy in the past couple of months has prompted more than one observer to say that we're headed for a "V"-shaped recovery that brings us back quickly to where we were before we took the plunge into recession. From a political perspective, that would be good given how rough some of the midterm elections are looking for Democrats. Most analysts, however, are more cautious about the shape of things to come. The reason is that, despite clearly positive trends, the data are still, shall we say, a bit lumpy. For almost every positive trend, there is something lurking in the statistics that gives analysts pause.
For instance, the GDP (subject to revisions) is at 3.2%, which is encouraging considering where it was last year at this time and where it would no doubt be if those who tried to squelch the stimulus package had had their way. But it's far less than where the GDP was at this stage in the recovery from the early 1980s recession. Then, too, one poll shows a considerable rise in Americans' favorable attitudes about the economy, with 41% saying it's getting better and only 15% saying it's getting worse.
Such a positive perception can have a positive effect. Reinforcing this is the fact that consumer confidence was up modestly in April as determined by the Conference Board. But the Michigan sentiment index fell off a bit. And the ABC News Consumer Comfort Index, while improved in the latest week, remains deeply negative overall, with only 25% of the respondents saying now is a good time to spend money.
On the other hand, the manufacturing index is up, way up, having risen for many months in a row, and now registering at the highest level in six years. Likewise, retail sales are up. But they seem to be weakening. That may be because so much of the spending is coming from savings and soon-to-be cut off government benefits, an unsustainable path to prosperity. Pending home sales have increased. But personal bankruptcies are up. Enough, you get the picture. Lumpy.
All this points to why the Department of Labor's monthly report coming out tomorrow is being looked at with even more than the usual anticipation. And why the range of opinion from experts surveyed by Bloomberg is so wide. There's no question that the report will show growth just as it did last month. For one thing, preliminary indicators such as the ADP report of private-sector payrolls were even more positive than expected. Indeed, it seems pretty clear that we'll continue to see job growth the rest of the year. But how much growth is what is on everyone's minds. The diversity of opinion about this can be seen in the consensus of those surveyed experts: 200,000 new jobs created in April, about 100,000 of them being Census hires. But the range of individual predictions within that consensus is 110,000 to 500,000. What's such a huge distribution mean? Most likely a lot of guessing as a consequence of that lumpy data.
Something we don't have to guess about is what researchers at the John J. Heldrich Center for Workforce Development call No End in Sight: The Agony of Prolonged Unemployment. That's their report released earlier this week. Over the past year or so, several commentators and bloggers – even optimists – have spent considerable energy deploring the effects of long-term unemployment and urging action to deal with it.
[A more readable version of this chart and others like it can be seen at Paper Economy]
We know that the longer people are unemployed, the more likely they are to stay unemployed because they tend to lose their skills and they get discouraged. If they get discouraged long enough, they fall right out of the unemployment statistics, although the DOL makes an effort with its U6 gauge to include some of them. As of last month's report long-term unemployed (those jobless for 27 weeks and over) totaled 6.5 million.
A few highlights from the report:
It is no surprise that three-quarters (77%) of those unemployed report that the current economic situation is having a major impact on them and their families. In addition to drastically reducing discretionary spending, the more serious setbacks for the unemployed have come in the form of increased borrowing, missed debt payments, reduced medical care, and bankruptcy. ...
In a national survey conducted by The Kaiser Family Foundation in March 2010, respondents were asked to rate their personal health. While 48% of Americans rated their personal health as very good or excellent in the national survey, just 30% of those currently unemployed rate their health as very good or excellent. ...
Just over half (54%) of the newly reemployed say they are at least somewhat satisfied with their jobs, but this is true of 88% in the workforce as a whole. ...
Some other statistics from No End in Sight:
• 79% of those looking for work in August 2009 had not found a job by March 2010. Only 10% returned to their previous job. 28% who found a job had looked for a year.
• 61% of those who found jobs said it was "something to get you by while you look for something better."
• 55% who found jobs took a pay cut. 33% took a reduction in benefits. 15% took fewer hours.
• 49% of the jobless have received unemployment benefits. 13% say they received benefits but these have now run out.
• 20% have had to move from their homes, with many now living with kin or friends.
• 70% say they have used savings or retirement money to get by. 47% have changed their plans for retirement, 46% have increased credit card debt.
• 42% have gone without medical care for themselves or their family.
• 30% have used Food Stamps, and 18% have gone to a soup kitchen or free pantry.
• 63% have seen a change in sleeping patterns or had loss of sleep.
• 46% have had a loss of contact with close friends.
• 46% have found themselves quick to anger.
Whatever tomorrow's jobs report shows – and I, for one, hope it shows a lot of people going back to work – we will still have millions of jobless Americans for a long time to come. The changing global economy demands that we create a government jobs policy that takes a far more pro-active stand than anything we've seen for the past 70 years. A program – or package of programs – that provides unemployment benefits simultaneously with training and retraining for jobs that will really exist would be a good place to begin. Combining that with direct hires by the government any time the economy is in recession and reducing those numbers when the private sector is doing its own hiring again would go far toward limiting the trauma to individuals and society that are documented in the Rutgers' report.
Such programs, however, would only be gum to plug the holes in a system where, in the past few decades, wealth has been transferred ever more upward until the top 1% owns 40% of the wealth and the assets of the average single black woman are $5. A system where government oversight has been steadily dismantled, yet in the midst of the worst economic crisis since the 1930s, only modest new regulations are proposed. A system in which industrial policy – the kind of thing every other developed nation has long had in place – is sneered at. Unemployment is not some outlier, unconnected to these other matters. It is, in great part, their product.