Saturday, October 31, 2009
Happy days aren't here again, Part 1.
According to preliminary reports, the nation's Gross Domestic Product (G.D.P.) grew faster than it has in two years, and has finally shown a positive quarter after four negative growth quarters in a row. Some are pointing to these numbers and stating that the recession, which had been predicted to be very long and very deep, is now probably over.
Back when Bush was in office, there were some talking about recession even before the first negative growth quarter for the G.D.P. was posted, and many people, most of them conservative, mocked the idea mercilessly. Anyone calling out the warning in late 2007 or early 2008 was called a recession pimp. You probably recall that Phil Gramm called us a country full of whiners in the early summer of 2008, and was given a trip to the woodshed by McCain a few weeks later.
Had McCain won, I am confident that Phil Gramm would have had more real power in the McCain administration than Sarah Palin could ever have dreamed of getting.
Since I'm taking a trip down memory lane with all these links, let me link to a post from last year about how uncannily correct Peter Schiff was before the fact. In the interest of full disclosure, Schiff was predicting that gold would be at $2000 an ounce by the end of 2009, and currently it is only slightly above $1000 an ounce, so nobody's right all the time.
We've seen that G.D.P. isn't the best way to look at the economy. Those who say the current recession started in late 2007, and that is now the conventional wisdom, pointed to job growth. As you can see on this graph, there was actual job growth in the last three months of 2007, but economists agree that we need some job growth just to keep pace with the growing population of people of the age to be in the work force. Numbers vary, but the general consensus is that job growth somewhere between 140,000 and 200,000 is the break even point, so even those short blue bars at the left side of this graph are not enough on average to keep up with population growth. Everyone of every political stripe can agree that losing jobs in the economy isn't good, and we have now had 21 consecutive months of bad news about jobs. The Obama administration's only positive spin is that the trend is getting better, unlike the last year and change of the Bush administration where things just got worse and worse, but we are still a long way from getting actual job growth in a month, and even when that happens, there will be a lot of experienced people trying to get those jobs that new entrants to the work force would have taken in better economic times.
The economy works best when money is moving around, and people with jobs that create positive cash flow are the best means around for circulating money. Even with the years of growth we have seen in the G.D.P. in the past thirty years or so, economic disparity has kept working people from seeing many of the benefits of a growing economy.
More on that in Part 2 tomorrow.