The initial estimate is that fourth quarter GDP grew at a blistering 5.7% annual pace. With the usual caveats--third quarter GDP estimates started high and then were revised down to a much more modest level--that's great news.
But man cannot live by GDP alone. I'd argue that the better measure of whether the economy has returned to health is employement--at least, that's when the improvement starts to translate into improvements in peoples' real lives. Prolonged unemployment is one of the most crippling things that can afflict people in the modern world.
Yet despite a second consecutive quarter of growth, prolonged unemployment is what we're stuck with.
The number of long term unemployed has shot up relative to the people who find jobs relatively quickly. To some extent, this is normal for a recession; employment tends to be a lagging indicator, as cautious employers use existing workers to fill rising production orders, rather than taking on more employees that they might have to later fire.
But the last two recessions were characterized by lingering unemployment--the infamous "jobless recovery" under Clinton and Bush. One theory for why this is true comes from a paper by Erica Groshen and Simon Potter, which suggests that increasingly, America's unemployment tends to be structural rather than cyclical. In the old economy, aggregate demand collapsed for some reason, and workers got laid off, then called back to work when orders recovered. These days, it is more likely that your job and industry has gone away entirely.
That has particular implications for a skilled economy. In 1930s, when FDR was trying to combat mass long-term unemployment, all he needed to do was create a construction project; most of the men in the country did some sort of hard physical labor. It was relatively easy to create jobs that they could fill.
But what kind of public works projects would absorb mortgage brokers or mid-level managers? As jobs have gotten more skilled, more human capital is specific to firms, industry, and job classifications.
That means it's going to take longer to transfer those workers into other areas of the economy. Either they need to search harder to find a job that meets their skill set, or they need to get new skills. Either way, that high unemployment number is probably going to be very stubbornly persistent well into next year.