Diane Swonk, Chief Economist
Oct. 2, 2009 – 7:45 a.m. CT
Bridge to True Recovery Unstable
The economy is clearly in an accounting or "technical" recovery, as Fed Chairman Ben Bernanke said a few weeks ago. Much of the move from negative to positive territory, however, is due to aggressive government spending and stimulus programs – the most successful of which was the Cash for Clunkers program which reignited vehicle sales over the summer.
We also have the "advantage" of overshooting by drawing inventories down too low, which could give us a "surprise" jump in growth for a quarter or so.
Any kind of self-feeding recovery, however, requires job creation – something we are still desperately lacking. Payroll employment contracted by another 263,000 jobs in September, which represents a worsening in the pace of layoffs since the start of the summer. More than 7 million people have lost their jobs since the start of this recession. Over 15 million are unemployed. Some 5 million have been unemployed for more than six months.
Most importantly, small businesses, which have been the backbone of job creation for two decades, are not hiring. The best single indicator of a more robust and self-sustaining recovery will be when small businesses are willing to step back up to the plate and hire.
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