Economic Well-being and Employment

This Great Recession should re-teach us the importance of employment and jobs. Employment is where the divide between the people and the managers of our society, corporate and governmental, is greatest. That divide leaves the impacted citizen angry and feeling neglected and abused. Jobs could be the issue that we unite around.

For 50 years our economic machine was working well enough to provide secure, good paying jobs to our rising middle class. Two generations grew up and entered the workforce taking jobs for granted.

Our Great Recession showed us how far we are from that world. Our politicians don't seem to know that yet. They barely pay lip service to the unemployed. They prefer to bail out bankers and their bonuses

This is clearest in regard to our "jobless recovery." If you listen to Larry Summers, Chairman of the National Economic Council, and his cohorts, everything is going to be all right. The economy is bottoming out and we are already in the first stages of an economic recovery.

Unfortunately for workers, job creation is expected to lag the rest of the economy by several years. Working people are supposed to learn to live with a “jobless recovery” where the unemployment rate will hover around 8 to 10 percent.

Larry Summers has spoken and he is channeling Dick Cheney. He dismisses the human aspect of the economy. He allows policymakers to claim success because the bankers are making a profit again. He confuses the means (the economy) with the end (the well-being of the people).

Nevertheless, in my own hopefulness, I think I see some green shoots of humanity in the economics profession. It isn't newsworthy to our business-oriented press but in one instance the focus of economic policy shifted from aiding and abetting financial shenanigans to a concern for the well-being of people.

There is this first sign of hope that contradicts the Larry Summers-types. And it may in the end confound them.

The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is the group that determines the dates for the beginning and end of recessions. When these economists said that the recession began in December of 2007, they said they based their decision on payroll employment which peaked that month. Their criterion was the trend in job creation and loss.

This is an astonishing change. It put people first.

Previously the definition of the recession was two quarters of negative growth in the gross domestic product (GDP). Output or market activity was the measure of economic progress. The NBER specifically dismissed output as an unreliable and inappropriate indicator.

If Larry Summers wants to declare the recession over, he is going to have to contend with the NBER. A "jobless recovery" is now an oxymoron, a contradiction. The economy cannot be in recovery unless payroll employment is in recovery because payroll employment is the metric used to determine recovery.

This is more than a semantic word change. Payroll employment measures the money that workers are receiving. It is what they spend and what the economists measure as consumption. If there is no increase in payroll employment, there can be no increase in consumption and no GDP growth.

After the 2001 recession, it was still possible to have a "jobless recovery" because workers could borrow money on their credit cards or the equity in their homes to maintain consumption. Now credit cards are maxed out and housing wealth has dropped by $7 trillion. There is no basis for even a jobless recovery.

The bad news is that the economy lost 7 million payroll jobs since the recession began and we need 150,000 new jobs per month just to stay even. The economy could go great guns and produce 300,000 new jobs per month. It would still take us until the summer of 2013 to get the economy job-wise back to where it was in December of 2007.

The good news is that policymakers will not be able to call it a recovery unless it is a real job-based expansion. Bad job numbers mean politicians will be called to do something about it; they need a recovery/expansion for the next election.

Maybe, just maybe, this NBER recognition of the importance of jobs will spread. Then this Great Recession will turn policymakers back to a proper respect for job creation as central to the health of the economy. Such action might even be a small part of the revolution that is now brewing among the people.