I have been talking about the Job Loss Recovery for quite some time. Here are a few recent examples.



July 14: Bernanke Sees Chance of Jobless Recovery

Given that the Fed's first mission is to delay, confuse, hope, and otherwise attempt to buy time while engaging in wishful thinking along the way, that Bernanke is willing to admit this may be a jobless recovery is a sign that things will likely be at least that bad. In other words, prepare for a job loss recovery .

Most know that I am in favor of an "L shaped recession", but that definition includes a "WW" or even a "WWW" where the economy slips in and out of recession for a decade, as happened in Japan.



Job Loss Recovery







The last three recessions are unlike the eight preceding recessions. For numerous reasons described below we are heading for another job loss recovery.



Job Loss Recovery Detail







click on chart for sharper image



If the pattern holds, unemployment will rise until 2011 or beyond.



So while everyone is tooting horns and cheering the end of the end of the recession before it has even ended, those graphs and comments from Bernanke himself will put the pending job loss Recovery into better perspective.

Rebounding Economy Shedding Jobs

Forget a jobless recovery. The economy may be entering a recovery with job losses.



Third-quarter estimates this week are expected to show that the economy grew for the first time since the quarter ending in June 2008. Despite the estimated 3 percent expansion and a stock market that has been on a tear since March, hundreds of thousands of people are still being laid off each month.



Eight million jobs have been lost nationwide since the recession began two years ago, and by some measures workers face the worst job market since the Depression. The average laid-off worker has been without a job for 61/2 months, a post-World War II record. Many of those workers will never recover financially.



California's hole, deepened by a state budget mess and volatile tax system, is far worse: Unemployment is at



12.2 percent, third highest in the nation; and adding discouraged and part-time workers puts it over 20 percent.



"It's not even a jobless recovery; it's a recovery with more job losses," said UCLA economist Lee Ohanian. "The idea of having essentially no net job creation after a remarkably severe recession is a real pathology for the U.S. economy."



'Painfully weak' job growth



Top White House economist Christina Romer of UC Berkeley told Congress on Thursday that employment growth could remain "painfully weak" through next year, and that the largest effect from the $787 billion stimulus enacted in February, mainly aid to states, is past. By mid-2010, she said, the stimulus will no longer contribute to growth.



Alarms are ringing at the White House and in Congress. But with a mind-boggling $1.4 trillion deficit this year, Democrats have used up their bullets. The word stimulus has such a bad connotation that the term has been banished from new efforts to goose the economy and help workers



Employment mystery



Economists are puzzled as to why job growth has slowed, citing everything from higher health care costs, to higher productivity, to Chinese currency manipulation.



"The answer is, we don't know," said Tim Bartik, a liberal economist with the Upjohn Institute for Employment Research in Michigan who is proposing a tax credit for employers who hire new workers.

There Is No Mystery

Tax Credits And Other Bad Ideas

University of Maryland economist Peter Morici said the administration's efforts to restore growth by directing spending to such things as alternative energy are too expensive for the number of jobs created and ignore larger problems in the economy.



"You can't grow with a huge trade deficit," Morici said. "If you don't revalue the Chinese yuan against the dollar you can't get out of this mess, and if you don't do something about oil imports you can't get out of this mess. Industrial policies won't fix it."

More nonsense has been written about balances of payments than about virtually any other aspect of economics.

Most economists are of the view that the ever-growing US trade deficit and the subsequent expanding foreign debt pose a threat to the well-being of Americans. What is then required, so it is held, is to set in motion policies that will help curtail the widening trade imbalances between the United States and the rest of the world. Focusing on the trade deficit as the supposedly major problem of the US economy only diverts the attention from the real culprit, which is the US central bank.



What matters for the process of wealth formation is the flow of real savings. The balance of payments statement doesn't provide such information. Consequently, it is not possible to determine the implications of a given state of the current account on the well-being of Americans without information regarding the state of the flow of real savings. Therefore various pessimistic assessments regarding the US economy, which are based on the state of the balance of payments, are likely to be without much foundation.