Despite
lots of backslapping among some enthusiastic Democrats with regard to the government's initial release of the Q4 '09 gross domestic product ("GDP") numbers, yesterday, Paul Krugman concurrently cautioned us to curb our enthusiasm as he noted that it was really just
"...a big GDP number signifying nothing much:" "
The Blip Cometh."
The Blip Cometh
Paul Krugman
New York Times Blog
January 29, 2010, 9:39 am
As expected, a big GDP number (pdf), signifying nothing much. It's an inventory blip: topline growth at 5.7 percent, but only 2.2 of that is final demand.
Just the day before, Krugman also reminded us of an inconvenient fact of which many
armchair economic pundits are
not taking notice...
"March of the Peacocks"
By PAUL KRUGMAN
New York Times
Op-Ed Columnist
Published In Print: January 29, 2010
...The nature of America's troubles is easy to state. We're in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that's keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.
--SNIP--
...we're still facing years of mass unemployment. The latest projections from the Congressional Budget Office say that the average unemployment rate next year will be only slightly lower than the current, disastrous, 10 percent.
Bold type is diarist's emphasis.
And, while some of those armchair economic pundits may rush to posit that the current Great Recession is "just like other recessions' past," citing the applicability of Okun's Law--a staple of traditional economic thought which I pointed out was totally contradicted by the just-announced Q4 '09 GDP statistics, in my post from yesterday--the truth is the numbers relating to our current economic downturn really are breaking a lot of old rules as far as traditional thinking on the economy is concerned.
From noted U.C. Berkeley economist Brad DeLong, yesterday: "5.7% Real GDP Growth Rate in the Fourth Quarter (Where Oh Where Is My Okun's Law? Department)."
5.7% Real GDP Growth Rate in the Fourth Quarter (Where Oh Where Is My Okun's Law? Department)
Brad DeLong
January 29, 2010
The Bureau of Economic Analysis:
"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent. The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 26, 2010..."
No surprise. But we are still all gobsmacked by what next week's productivity number will be--between 7 and 8%...
It's not just in this past quarter that productivity growth has been abnormally high given what is going on with real GDP. Look back at the past eight quarters: we are substantially outside of previous post-WWII American experience.
Bold type is diarist's emphasis.
(I'd strongly suggest reading DeLong's post in its entirety; the graphics are quite compelling.)
IMHO, our society is, indeed, writing new economic "rules" as you read this. Some would say--and I'd agree--that our society is (and has been) morphing into something quite different than it was in generation's past, too.
Meteor Blades focuses upon some of these new economic realities in a great post that's running on the front page as I write this.
The Wall Street Journal weighed in on this, too: "Wage and Benefit Growth Hits Historic Low."
Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking data in 1982, as double-digit unemployment weakened workers' ability to command higher pay.
In the past 12 months, the cost of wages and benefits received by workers other than those employed by the federal government rose 1.5%, according to the Labor Department's employment cost index. In the same period, consumer prices rose 2.7%.
Adjusted for inflation, wages and benefits fell 1.3%... The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said...
And, speaking of phenomenal graphics and succinct reporting on this story, there's this from the NY Times, on Friday...
"The Growing Underclass: Jobs Gone Forever."
Economix
New York Times
January 29, 2010
...There are multiple ways to explain why permanent job-losers represent a higher share of the unemployed this time around. Maybe, as others have suggested, many of the jobs gained in the boom years were built on phantom wealth. Or maybe the culprit is a corollary of Moore's Law, the idea of exponential advances in technology over time. That might suggest that innovation and automation displace more and more workers by the time each recession rolls around.
Whatever the underlying cause, the result is disconcerting: compared with previous recessions, many more of the employment gains in this recovery will have to come from new jobs.
That is much easier said than done.
Workers whose entire occupations -- not just the previous payroll positions they held -- are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire.
--SNIP--
All of which is to say that many of the Americans who are already out of work are likely to stay in that miserable state for a long, long time. And the longer they stay unemployed, the harder it will be for them to transition back into the work force, further adding to America's growing underclass.
The administration is likely to have a big labor (and class) problem on its hands, and one that won't be solved merely by an increase in the gross domestic product.
(Bold type is diarist's emphasis.)
Yes, it's the new normal; and there are new rules for it; and it's all about a rapidly growing underclass (a/k/a "...the destruction of the middle class"). And, as far as that massive portion of our population's concerned--you know, the folks Democrats used to reference as their base--they couldn't give a damn about Friday's big GDP numbers, either.
So, given everything we've quickly covered herein, maybe Democratic bloggers should consider curbing their enthusiasm about those "big GDP numbers," too?