Colorado has given back its entire job gains made in the past seven years. Welcome to the “jobless” recovery.
I nominate jobless recovery as the oxymoron of the year. Who thought this up? Clever “tweeters” in the White House? A catchy headline writer waiting for his pink slip at BusinessWeek?
No, it turns out we had jobless recoveries after the 1991 recession, just as George H. W. was ending his term (like father, like son), and again in the early 2000s, when “outsourcing” left us all talking to tech support in India.
But that was then, this is now. The economic playing field for everyone, especially investors agonizing over the numbers, is full of ruts. Jobless ranks are so big, and getting bigger, that if there really is a recovery, somebody, somewhere has got to ride to the rescue. But who is this masked man?
At least it’s not as bad here as a lot of places, Colorado officials say. But the numbers are miserable nonetheless.
Please clue me in, I asked people who actually read “The Economist,” on how we end a recession when GDP growth demands consumer spending. People who couldn’t live without a new high-def TV have become tightwads overnight. Ask bankrupt GM or Eddie Bauer. Savings rates suddenly are at their highest since December 1993.
Here’s the short answer from the experts: “We don’t know.”
CU economist Richard Wobbekind is predicting a “slow, general recovery.” It’s possible, he explains, that pent-up demand for houses and cars can kick-start spending. Bankers must become convinced that they can lend again, and some are.
Also in the “maybe” category is a technology-led recovery. Companies that have hoarded cash will start investing in servers, software and Facebook. Part-timers may get their hours back, but higher productivity from technology doesn’t necessarily mean a hiring binge.
So here we are:
Reality #1: Colorado’s employment peaked in mid 2001 with about 2.26 million employed in non-ag sectors. That’s straight from stats assembled by CU Business Research Division Managing Director Gary Horvath. Then it took 55 months -- fighting through a recession with economic development programs and a lot of hard work – to get back to that number in early 2006. In a final burst of good times to January 2008 (Remember then? You were buying stuff.), the state non-ag employment reached about 2.38 million.
Guess where we are today? In April employment sunk all the way back to 2.26 million – those hard-fought job gains of the past seven years vanished. Employment is not as low as when it bottomed in early 2004, but the past year took a terrible toll.
Reality #2: U.S. unemployment sits at 9.5 percent; Colorado’s at about 7.6. Anyone who tracks the jobless knows numbers lag reality. President Obama says double-digit unemployment is coming. In recessions, many just give up looking for work, falling from the unemployment radar. U.S. News & World Report editor Mortimer Zuckerman reminded us in his column “The economy is even worse than you think” that employees are taking unpaid leaves and being forced into part-time positions.
Reality #3: Colorado’s recent job stats from CU’s Business Research Division were dismal at best. We’ll lose 55,000 to 65,000 jobs this year even if things get a little better, Wobbekind says. The only sectors dodging big cuts so far have been government and health care. But municipalities face plummeting revenues from both retail sales and property taxes.
Joining laid-off construction workers are engineers, lawyers and computer system designers. Throw in layoffs in travel and leisure, manufacturing, retail and information businesses, and it’s one big train wreck, cars piling into one another.
I posed my doubts of a “jobless” recovery to friend Carl Hunt, a semi-retired economist who still consults in the wind energy field (another promising green business hammered by low natural gas prices).
He gave me four scenarios.
One, unemployment keeps on climbing, maybe to 15 percent or higher. Prices drop even more. Some are worried this will be a “double-dip” recession. Not politically acceptable.
Two, government steps back in again – big time. Another huge incentive program more directly tied to job creation vs. what we got the first time. One problem. The U.S. deficit has reached a record $1.08 trillion. Obama forecasts it will reach $1.84 trillion for the fiscal year ending in September. “The pushback is very strong against more deficit spending,” Hunt says.
Three, an incredible new technology discovery is made – like an electric car battery that runs for thousands of miles without a charge. Not likely.
Four, the global economy heats up faster than anyone predicts, and exports help dig us out of our hole.
Despite some Ponzi schemes here and there, Hunt says it’s the wealthiest people in the country who remain the most unscathed by the recession. But it’s the middle and lower classes that must get real jobs to rescue GNP.
Hunt agrees with Wobbekind that a recovery is slowly starting. But unlike past recessions, the consumer is unable to borrow his way out of this one; credit is still “hell.”
Who’s to say if a “jobless” recovery is all hopeful optimism? What do you think?