Economic Outlook: Faux recovery

By ANTHONY HALL, United Press International  |  Dec. 22, 2011 at 9:56 AM
share with facebook
share with twitter

The gross domestic product is supposed to go up when claims for unemployment benefits go down.

Not this time.

The Commerce Department issued its third and final estimate of the third-quarter U.S. GDP Thursday, pegging economic growth at 1.8 percent July through September. The previous estimate posted was 2 percent -- and even the lower estimate beat the second quarter by 0.5 percentage points.

Economists say it takes 2 percent growth to keep the unemployment rate from rising -- the reasons being that productivity tends to increase and more workers enter the workforce than leave every year.

If there is a definition of dismal, it is GDP growth that does not at least accommodate the basic needs of the workforce. Further, analysts say it will take an average of 360,000 new jobs per month to lower the unemployment rate. In contrast, 120,000 jobs were added to the economy in November.

In November, 13.3 million people were listed as unemployed, which was 600,000 fewer than the previous month, meaning many more workers had become discouraged and quit looking for work, which takes them out of the loop numerically.

The Labor Department in a weekly report on unemployment claims said 4,000 fewer first-time benefit claims were filed in the week ending Dec. 17, pushing the four-week rolling average to 380,250, maintaining its niche under 400,000 for the sixth consecutive week.

Suspiciously, the economy is showing signs of improvement, just as it did last year at about this time. If memory serves, the first four months of 2011 found the word recovery creeping into headlines and even in the cautionary statements issued by the U.S. Federal Reserve. By June and July the reality of slow growth had returned and the word recovery was tossed to the curb. This time around, it might be wise to follow Woody Allen's advice about the word "love," which he said in the movie "Annie Hall" wasn't adequate, suggesting, "lurve," would suit his strong passions better.

If that's the case, to adequately define this false summit, perhaps faux recovery would better suit the occasion. After all, a GDP that fails to hit 2 percent -- as some estimates say is not going to happen in 2012 -- is going to reveal itself in the labor market before too long.

In international markets Thursday, the Nikkei 225 index shed 0.77 percent while the Shanghai composite index in China lost 0.22 percent. The Hang Seng index in Hong Kong dropped 0.21 percent while the Sensex in India rose 0.82 percent.

In Australia, the S&P/ASX 200 index dropped 1.18 percent.

In midday trading in Europe, the FTSE 100 index in Britain added 0.96 percent while the DAX 30 in Germany gained 0.94 percent. The CAC 40 in France climbed 1.3 percent, while the Stoxx Europe 600 gained 0.88 percent.

Related UPI Stories
Topics: Woody Allen
Trending Stories