Recession not over until job recovery secure

Freedom New Mexico

Washington intervention isn’t saving or creating jobs, so more is coming.

Figures released this month showing unemployment nationally at 10.2 percent suggest those who proclaimed the end of the recession when GDP rose 3.5 percent during the third quarter were more than a little premature.

Is a “jobless recovery” really a recovery?

The classic definition of a recession’s end is two quarters, not one, of increasing gross domestic product, and the National Bureau of Economic Research, which officially “calls” recessions and their ends, has even more exacting standards. The GDP increase was artificially boosted by the “cash for clunkers” program, which won’t be replicated, and the housing market may not yet have bottomed out.

Perhaps most importantly, as even an AP story noted, rising unemployment can easily sap consumer confidence as we move into what used to be called the holiday buying season (but in tough times may become the year of giving something homemade and more “meaningful”).

Consumer spending still accounts for about 70 percent of the GDP. If it doesn’t pick up dramatically, the third-quarter GDP increase could come to be seen as merely a blip.

President Barack Obama’s response was particularly lame. He crowed that Congress had just passed a bill extending unemployment benefits and not only extending tax credits for first-time homebuyers but adding a credit for people who have owned a house for five years to “move up” to a more expensive house.

Extending unemployment benefits may ease some of the pain of unemployment but it doesn’t create a single new job (and may even be a slight deterrent to job creation). The notion that the key to prosperity is artificially propping up the housing market and preventing housing prices from going too low seems especially perverse. Weren’t government policies that encouraged churning in the housing market a big part of what got us into this crisis in the first place?

We can understand a certain desperation within the administration as it becomes obvious that the $787-billion so-called stimulus bill hasn’t exactly created a recovery, and the bare facts contradict shaky administration claims of the number of jobs “saved or created” by the stimulus. Will it get desperate enough to do something sensible?

A sensible approach would include setting aside efforts to pass government-dominated health care reform and climate-change legislation, both of which are job-killers, followed by permanent tax cuts.

But don’t hold your breath.