The Job-Filled Nonrecovery

     Right now everyone's talking about it. Marcus Nunes was discussing it yesterday, reviewing what Ezra Klein and Yglesias are saying about it. Jared Bernstein also wrote about it.

     http://thefaintofheart.wordpress.com/

     As Bernstein puts it, lately we seem to be breaking the law. Or at least the economy is.

     "Something odd is happening in the economy. Jobs are coming back, and relatively quickly. But growth is lagging. Or, at the least, we think it is. Virtually every estimate of GDP growth for the first quarter of 2012 is below two percent — that’s a third lower than it was in the fourth quarter of 2011, when payroll growth was lower — and many of those estimates are being revised downward as new data streams in."

     There's been a struggle to name it, but it seems to me that Scott Sumner-who is the first person I saw mention this dynamic-called it the name we give it in the title, a job-filled non-recovery. This seems appropriate as it's the opposite of what we got at teh end of the 2001 recession-that was the famous jobless recovery. That time we saw GDP come back stronger with few jobs.

    The law in question is Okun's Law. Right now the economy is adding jobs at a faster rate than is indicated based on GDP estimates.(Incidentally, Okun also gave us the Misery Index-that's the unemployment rate plus the inflation rate). There are a few possible explanations for this. One is that it's just a tease like we saw early during 2011. That's the worst case scenario of course.

    I deliberately gave this reason first as it's the worst case-why not get the bad news out first? The other possibilities are better. Maybe the GDP estimates are currently to low. This means that in this case the good jobs numbers are an indicator that things are better than we realize yet.

   Then again it could be that job growth was previously too low and employers are now playing catch up.

    Incidentally, Bernstein for his part doesn't believe we're actually breaking Okun's law. The reason for this is he thinks trend GDP growth-you get trend GDP combining productivity and output-is actually lower than the 2.5% economists currently assume. This is due to the recent slowdown in productivity. It is this Bernstein believes in helping the jobs numbers.

    http://jaredbernsteinblog.com/are-we-really-breaking-the-law/