With record competition for jobs, why does Bernanke think the recession is over?
Filed under: Economy
It's tough to find a job these days. In 2000, the Labor Department began keeping statistics on the ratio of unemployed workers to permanent job openings. This July, that ratio hit a record of six to one -- representing the 14.5 million official unemployment count to 2.4 million permanent full-time jobs open (in the 2001 recession, the ratio was about two to one). With the open position ratio at three times the previous record, it makes me wonder why the Fed thinks the recession is over.
This is scary for workers. The New York Times interviewed 51-year-old Milwaukee resident, Debbie Kransky who lost her medical billing job in February. Since this was her second job loss in two years and the job she lost in February lasted only a month, her last unemployment check -- $340 -- is her final one. She has run through her $10,000 life savings.
Kransky -- who lives alone in a one-bedroom apartment -- is understandably worried. She spent $10 to drive her jeep downtown to interview for a clerical job with a health insurance company , but she got stood up after waiting an hour. As she told the Times, "I've worked my entire life. I've got October rent. After that, I don't know. I've never lived month to month my entire life. I'm just so scared, I can't even put it into words."
This bad news on the jobs front is not dissuading the Fed from getting optimistic about the end of the recession. Two weeks ago, Ben Bernanke defended his pronouncement that the recession was nearly over by citing the consensus of economic forecasters for "moderate economic growth for the remainder of this year and next as credit markets thaw, consumer confidence takes time to heal and the federal government begins to unwind spending and lending programs intended to mend the economy."
Of course the National Bureau of Economic Research (NBER) that sets the official start and end-dates for recessions (a decision made largely on the basis of the collapse in the job market) decided the beginning of the current recession was December 2007 based on payroll employment. And since then, that collapse has been extreme across regions and industries in the U.S.
The regional job damage has been worst in the West and South, but significant nationally. Between the start of the recession and July 2009, job openings fell 45 percent in the West and the South, 36 percent in the Midwest and 23 percent in the Northeast.
Meanwhile, job openings across industries have fallen significantly, with manufacturing being the worst. Since the end of 2008, manufacturing job openings have tumbled 47 percent, 37 percent in construction and 22 percent in retail. Those in education and health services fell 21 percent this year and -- despite the $787 billion stimulus spending -- government job openings slid 17 percent.
So the Fed's comment on the recession nearing an end looks to be based on Gross Domestic Product (GDP) growth forecasts rather than the NBER's employment reality -- which for Americans like Kransky means that their fears are going to be magnified.
This distinction is more than academic. If the Fed changes policy -- e.g., by draining $1 trillion from the money supply -- in response to what it thinks is economic growth it could further slash the odds that U.S. employers will start creating enough new jobs to end this recession.
Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter.
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Reader Comments (Page 1 of 1)
9-27-2009 @ 2:26PM
Rick said...
This is a story that I wrote about The economy worse than meets the eye and think my story fits here also.
I am one of those people leaving Florida. The reason is that both my wife and I both had really great paying jobs and Yes were also putting money in our savings for a rainy day. Well that storm came and wiped us out. My wife lost her good paying job in November and found a part time job, because that is all she could find. We were doing fine til 6 months ago when I lost my great paying job. All because of the economy slowing down that we got laid off. The bank has already said they will not work with me and now we are losing everything and not because we went and spent like crazy but not finding anything in 6 months after, 100's of resumes sent out, 7 job fairs and nothing. That is why were are leaving. Oh yeh could have gotten a job, but the company wanted to charge me $3900.00 up front and then a percent from the company that hired me. If I had that kind of money I would put it to better use than that. To end the story, we are moving in with the in-laws up North. Not because we want to but because we have too. It is really sad when a lot of people work so hard for so long and end up losing all the things we all worked hard for and now our credit is going to the dump because we can't live on the 275 a week the state gives for unemployment; the bank won't even look at us because the money that we make now will cover the utilities and food. Now with my wife in part time work which means no health insurance. Everyone keeps telling me "It will get Better" I have been asking myself all the time. When will it! We are getting forced to file for bankruptcy because our house isn't worth what we paid for it, no job, nothing here for us and that is they only thing we are waiting for, then we are moving up north.
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9-29-2009 @ 3:29AM
Ted said...
If the the US economic recovery is dependent upon consumer spending, then the "consumer" must have money available to spend. And, without jobs, there simply is no money available for consumers to spend.
Instead of pumping hundreds of billions of taxpayer dollars into failing corporations and allowing the executives of failing corporations to be rewarded with hundreds of millions of dollars in undeserved bonuses for jobs poorly done - our government should have considered the option of pumping at least a few billion dollars directly into the pocketbooks of its citizens. Afterall, the American consumer is expected to pull America out of this recession; a recession largely caused by an irresponsible and greedy banking industry.
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9-28-2009 @ 1:48AM
Alessandro Machi said...
Not only can there not be a recovery, there can't even be real stability if the one trillion dollars in OLD consumer credit card debt keeps adding 15-25 billion dollars in NEW interest charges EVERY month.
Turkey has a plan to help its citizens pay down their credit card debt by lowering interest rates. Anybody who is serious about reducing their overall credit card debt should have their interest rate charges waived on their existing credit card debt. (but not new debt).
Before people argue that that would cost the bankers a loss of profit, it is a much better alternative to the record credit card defaults that are going on specifically because the credit card companies RAISED interest rates on existing credit card debt.
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9-28-2009 @ 4:29PM
JMA said...
Hey...What happened to the MILLIONS of jobs that the all-mighty Obama was going to "create"...and the millions more that he was going to "save"...?!?!?!...Not to mention all the other bull-krap promises he made to his delusional supporters...
Guess this is just more proof that Obama is a Jackass (that IS the symbol of the so-called Democratic party, isn't it?!?) and that he has no idea as to what he is doing...It is either THAT, that he is CLUELESS, or that he is deliberately and swiftly trying to push America into a state of Total Crisis so that he can push his and his cronies' Marxist Agenda and turn America into a totalitarian Socialist State...
The only things that are certain are that are that he and his corrupt administration are DESTROYING America and that he is an anti-American, pro-Muslim piece of lying Marxist garbage...And that "We, the People" need to get this Usurper false-president out of office as fast as possible and by whatever means necessary....
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9-28-2009 @ 8:18PM
Jim said...
We're flat broke, too, like many other Americans. We're now down to one income and no health insurance and here in Ohio, there are no jobs; instead, everyone seems to be back in college, spending student loan money to "get a degree for a good-paying job" that, quite frankly, I don't see forthcoming anytime soon. The colleges are just making millions on these education junkies who will realize all too late that there are still no jobs when they get their coveted degree. I know several college graduates who are thankful just to be flipping burgers part time at Burger King! That said, I have to say that I am astounded when I pass the local shopping malls and stores around here: cars, cars, everywhere........people lugging huge bags of merchandise form these stores to their shiny new cars.........a friend of mine sells appliances for an appliance store; they've been swamped with business and people buying huge ticket items for a few months now. The point in all of this is that I see an even bigger economic depression coming (and it IS a depression, NOT a recession) and I just can't believe that people are still out spending like there's no tomorrow. My car is 12 years old with 190,000 miles on it; I have to repair this thing weekly, myself. I'm terrified that it's going to die this winter for good. Then, there will be no way for either of us to get to any job. Yet I keep seeing people buying new cars. I just don't get it. Where in HELL are all of these people (many of whom are constantly crying broke) getting all their spending money? Could it be coming from student financial aid loans being misused? We can't afford new appliances or a car or even a new television set; we're doing ok just to keep the utilities on each month while fighting to keep from going past two months overdue on the mortgage! Indeed, this depression WILL continue to get far, far worse. Will anyone pay attention then, or will they continue to spend their way into deeper debt?
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9-30-2009 @ 10:28PM
Gayle said...
You are correct. When will main street think the recession is over? When job growth resumes according to this recent CNN poll, not when GDP turns positive.
QUICK VOTE RESULTS
1. When will you know that an economic recovery is underway?
When the Dow tops 10,000 5%
When GDP turns positive 9%
When job growth resumes 66%
It's already started 20%
Total responses to this question: 34452
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