Wednesday, December 30, 2009

"Jobless Recovery": Traditional Interpretations

It’s almost 2010…what’s ahead?

Last night, as I was driving along a country road, I listened to a program on NPR. They were talking about the “jobless recovery.”

What is a “jobless recovery”? It seems to be a situation where the economic indicators are improving, while unemployment numbers remain unchanged, or worse, on the rise.

There were 3 statements that I would like for you to consider:

According to the guest, there seems to be a dichotomy between the economists, who measure the state of the economy by looking at certain metrics, and politicians, who tend to evaluate it based on what they hear from their constituents, many of whom are still unemployed. Economists look at traditional statistical data such as: the GDP (gross domestic product, the dollar value of all goods and services produced in the US in a year), CPI (consumer price index, tracking the prices of certain products, housing starts, the stock market, and tell us that things are improving. Politicians tell us that many of their constituents are still unemployed. (In fact, we've lost 11 million jobs during this recessionary time.) That's why we have the term "jobless recovery."

Seems like a contradictory term to me. Why is that? Why are there no jobs or few jobs being created while the economy is showing signs of recovery? Why are economists seeing one thing and politicians another? Why the difference?

The second fact reported was that while some people are getting jobs, the long-term unemployed (defined as being unemployed over 6 months) are having the toughest time finding jobs. This may seem obvious as the longer one is unemployed, conventional wisdom has it, the more difficult it becomes, and there are some people in the job market who are simply "unemployable." But, this time around, this group is having an even more difficult time, than the long time unemployed during other recessions.

Again, my question to you: why are those people in the longest unemployed group having the most difficult time ever finding jobs, and more difficult than ever before?

Finally, the third point: statistics point to a surge in temporary hiring, and that this surge is used as an early indicator for rising employment.

My question is: what is the meaning of a surge in temporary hiring? Is it predictive? Is it good news, or not?

I wanted to pose these questions to you in an effort to get you to think about the employment situation and unemployment statistics. I have given you three sets of facts to consider. What is the "correct" interpretation of these facts?

The current interpretations are mostly based on conventional wisdom, and looking at the data through a traditional lens. I will share these with you tomorrow. In the meantime, I would like to encourage you to think it through for yourself. Developed critical thinking is one of the two most important skills for the next decade. Practice this ability and create your own interpretation.

And, I'll be back tomorrow... :o)

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