You'd think some super-smart Dems might notice the difference here. You'd be wrong.
The GDP/unemployment vision gap perfectly captures the outlines of a world where Dems happily vote to cut off ACORN, and let Wall Street keep wallowing in public cash
Mr. Bernanke, who had become cautiously more upbeat in recent weeks amid signs of third-quarter growth, said for the first time that forecasters agree "at this point that we are in a recovery."
The rebound, he added, would likely be so moderate it wouldn't produce many jobs.
"Even though from a technical perspective the recession is very likely over at this point, it is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was," he said.
His remarks, made after a speech at the Brookings Institution in Washington to mark the anniversary of the collapse of Lehman Brothers, came just after the Commerce Department reported retail sales climbed 2.7% in August after falling 0.2% in July.
And they added this optimistic chart, showing the biggest spike in autos, helped out by the now-terminated "cash for clunkers" program:
But on Thursday, Nobel Prize-Winner Joseph Stiglitz said 'not so much':
Just after returning to New York from Japan, Britain, and economically devastated Iceland, Stiglitz paints a picture of a U.S. economy that has stanched the most serious bleeding but remains deeply wounded. "I think we would be lucky to be out of the recession by 2012," Stiglitz says. "2010 may be a year of positive growth, though far weaker than would be necessary to get unemployment down significantly." Central to the grim diagnosis, Stiglitz says, is the lack of new jobs -- an argument echoed by the Organisation for Economic Cooperation and Development, which this week said high unemployment in the world's wealthiest countries could last years.
The difference here lies in what the two economists are looking at. Bernanke appears to going with the technical, GDP-based definition: if GDP is no longer going down, the recession is over. By that measure, the Great Depression ended sometime in 1933, if you can believe it-though, of course, there was another Recession when Roosevelt let up on recovery efforts and tried to balance the budget. Stiglitz, OTOH, is looking at jobs. And jobs didn't fully recover until WWII brought us the fullest employment economy we had ever known.
With President Obama's stimulus program ending in 2011, the U.S. faces continuing turmoil, says Stiglitz. "There is likely to be weakness again in the economy in 2011," Stiglitz says. "2012 is an optimistic view of when we could be over the travails. The technical term 'recession' is two quarters of negative growth, and we're likely to have positive growth this quarter and next quarter -- but that's not what most people mean by 'out of recession.' Most people mean, 'Are jobs plentiful? Is unemployment low? Are wages strong?' And in those core ways, we are far from being out of the recession."
Still, economic conditions have improved over a year ago, Stiglitz allows. "We're no longer at the precipice, but there are many bumps ahead," he says. "The couple million homes in foreclosure, commercial real estate, high unemployment, mean that some people are not going to be able to repay loans that are outstanding. The banking system is by no means out of the woods. There is reason to believe that there will be continue to be bankruptcies of the banks."
Reinforcing Stiglitz's message, an OECD press release, accompanying a new report of economic data, warned of a continuing rise in unemployment, and the need for governments to do more, while the US summary (pdf) warned that US efforts were lagging. From the press release:
Governments must act fast and decisively to prevent the recession turning into a long-term unemployment crisis, according to OECD Secretary-General Angel Gurría. "Employment is the bottom line of the current crisis. It is essential that governments focus on helping jobseekers in the months to come," he said at the launch of the OECD's Employment Outlook 2009. He also argued for a co-ordinated policy response to the crisis and urged policy makers not to forget the plight of those in the developing world that often cannot benefit from well-designed social protection systems.
Despite early signs of economic recovery, in most countries unemployment will rise further next year and remain high for the immediate future. The unemployment rate has already reached a post-war record high at 8.5% in the OECD area, corresponding to an increase in more than 15 million in the ranks of the unemployed since the end of 2007. If the recovery fails to gain momentum, the OECD unemployment rate could even approach a new post-war high of 10%, with 57 million people out of work.
In light of this, the report argues, governments must urgently reassess and adapt their labour market and social policies in order to prevent people from falling into the trap of long-term unemployment.
Most OECD countries have introduced measures to support labour demand. These include temporary cuts in employers' social security contributions and short-time working subsidies to compensate workers for working fewer hours or to encourage firms to hire. In the short-term, the OECD acknowledges that these measures are playing a positive role.
The OECD goes on to advise about measures governments should take:
As part of an overall strategy to tackle the jobs crisis, the OECD also recommends governments to:
• Help young people who have been hardest hit by the crisis, especially those with few or no qualifications. Targeting this group will reduce the risk of a "lost generation" of young people falling into long-term unemployment and losing touch with the job market.
• Reinforce social safety nets to avoid jobless people falling into poverty: on average in the OECD area, 37% of individuals living in jobless households are poor - five times higher than for individuals living in a household where at least one person has a job.
• Increase spending on active labour market policies, such as job search assistance and training, to help the unemployed back to work. Spending on these policies has risen in many countries over the past year, but only modestly compared with the magnitude and pace of job losses. In Ireland, Spain and the United States, which have seen the fastest rise in unemployment in OECD countries, spending per unemployed person on active labour market policies has fallen by 40% or more over the past year.
• Foster skill formation to ensure that workers are well-equipped with the appropriate skills for emerging jobs, including green jobs.
All this seems like a fantasy in Obama's America, which continues to look like a mere extension of Reagan's America, for all the campaign talk about "change we can believe in."
The US summary notes:
Unemployment was quicker to rise in the United States than in many OECD countries. Like their Irish and Spanish counterparts, US workers were hit early and hard by the recession, largely because all three economies were buffeted by the collapse of a bubble in home construction. Since the recession began in December 2007, payroll employment has dropped by 6.9 million in the US and the unemployment rate increased by 4.8 percentage points to reach a 25-year high of 9.7% (Figure 1). Unemployment has risen much less sharply in many other OECD countries, including large economies such as Germany, Italy and Japan, which were slower to feel the effects of the economic downturn.
And furthermore-though you'd never know it from the Glenn Beck crowd:
Youth, low-skilled and ethnic minority workers have borne the brunt of rising unemployment. The unemployment rate in the US rose by 4.8 percentage points during the first 20 months of the current recession, reaching 9.7% in August 2009. Over the same period, the increases in unemployment were significantly larger for teenagers, rising by 8.6 percentage points to an all-time high of 25.5%. Other groups seeing sharp rises include young adults by 5.9 percentage points, high-school dropouts by 8.1 percentage points, Blacks by 6.2 percentage points and Hispanics by 6.8 percentage points....
When the recession began, government spending on labour market programmes was relatively low in the United States as compared with spending in most other advanced economies (Figure 2). While the recent increase in resources, including via the American Recovery and Reinvestment Act, is welcome, it may not be enough to support effectively all job seekers and some could be at risk of drifting into long-term unemployment and exclusion. Indeed, one in three unemployed persons in the US had been jobless more than six months by August 2009, the highest since records began in 1948.
Here's that Figure 2 they were talking about:
As the wealthiest of the major industrial nations the fact that we do so little for workers in need stands both as a profound moral indictment of political class as a whole, which cares so little about those in need, and as a stinging rebuke to the delusional GOP, which forgets the Gospels, and imagines a vast government takeover where the exact opposite is the danger that threatens us most.
Joseph Stiglitz lives in the real world. Why don't Democrats listen to him? Why isn't he running their economic policy?
