August 19, 2011
The business media have become obsessed with the notion of a double dip recession in a context where the economic data we are now seeing is not very different from the data that we have been seeing for months. These data point to a picture of an economy that is growing weakly, however it is still growing. However reporters who are now obsessed with the “double dip” are reading numbers consistent with weak growth as implying a recession.
For example, a Washington Post article that raised the prospect of a second recession in the 5th paragraph told readers:
“The latest figures on unemployment, considered another key piece in any recovery, also proved disconcerting. The Labor Department said Thursday that weekly unemployment benefits again rose above the 400,000 level last week, a benchmark figure that many economists take as a sign of a declining economic trajectory.”
Actually, economists who are familiar with unemployment data would not consider 400,000 new unemployment claims “a benchmark figure that many economists take as a sign of a declining economic trajectory.” The reason is that unemployment claims have been above 400,000 in every week since the beginning of April, except for two weeks ago when there were 399,000 claims. Weekly unemployment claims were also above 400,000 in every week of 2010, a year in which the economy grew 3.1 percent.
The misplaced obsession with a double-dip has consequences because it creates a situation in which the slow growth that the economy is now experiencing appears to be good. For example, the July jobs report, which showed 117,000 new jobs, was widely seen as good news. However, this pace of job growth is only slightly faster than the 90,000 rate needed just to keep pace with the growth of the labor force. At the July rate of job growth it would take close to 30 years to replace the jobs lost in the downturn.
It would be helpful if reporters would try to discuss what the data show and not frame their story on misplaced optimism or pessimism from ill-informed commentators.
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