April 22, 2018
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Recovery Curve

If there is one key measure in assessing the nation’s recovery from this deep recession, it is job creation. By that measure, there is a bright spot.

A chart circulated by the Obama administration makes the case, visually, that the economy is on the upswing. Using a bar graph to illustrate job losses since the recession began in December 2007, it shows job loss growing month by month, peaking in January 2009, then diminishing through January 2010.

Lest anyone misread the implication of the graph, the left side, in which the job trend loss grows, coinciding with the final year of the Bush administration, is in red. The right side, in which the job loss trend abates, coinciding with Mr. Obama’s tenure is in blue.

The administration is making the case for the success of the American Recovery and Reinvestment Act. ARRA was the $787 billion stimulus package, which drew the ire of fiscal conservatives and big-government opponents. Almost all Republicans in Congress opposed ARRA; Maine Sens. Olympia Snowe and Susan Collins voted in favor of the measure.

From about 175,000 jobs lost in April 2008, the bleeding grew to about 775,000 jobs lost in January 2009. The trend reversed, from about 725,000 jobs lost in February 2009 to about 20,000 jobs lost in January of this year.

The problem the administration has in defending ARRA is that of proving a negative; how can it show it prevented the economy from falling off the cliff? And how can it trumpet the success of its policy when 8.4 million jobs have been lost since December 2007?

It is difficult to imagine a Republican administration not passing a stimulus package in early 2009. In fact, the case can be made that the economy would have begun recovering more robustly had a bigger stimulus been enacted. According to the nonpartisan Congressional Budget Office, ARRA will boost gross domestic product by between 1.4 and 4 percent and lower the unemployment rate by between 0.7 and 1.8 percent in 2010.

The most effective component of ARRA has been the direct purchasing of goods and services by the federal and state governments. Least effective, the CBO concluded, were the first time home buyer tax credit and a tax break for wealthy Americans.

The more recent the recession, the slower the job recovery has been. During the recession of 1981, the period from peak employment to peak unemployment back to original employment levels took 27 months. The recession of 1990 took 30 months for jobs to return to their pre-recession levels. And in the 2001 recession, it took 46 months for jobs to return. This time, it may be longer.

In the 1960s, companies such as General Motors would boast to shareholders about the numbers of people they employed. Unfortunately, businesses in the modern economy boast about how they hold the line on employment with temps and outsourcing.

When jobs return and tax revenues rebound, it is imperative that government reduces the deficit. Until then, it is clear the artificial respiration of ARRA was a good course of action.

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