As Neil Irwin reported in the Washington Post, businesses are only producing 3 percent fewer goods and services than when the recession started, but Americans are working 10 percent fewer hours. Work hours are getting the squeeze, but we're producing nearly the same amount of juice. In the long-run, that's good news for America's production engine. In the short-term term, it's keeping millions of Americans at home.
I was on Larry Kudlow last night talking about the state of the consumer. He's right that there are green shoots. Case-Shiller home prices are up. The stock market looks awesome. Our latest annualized GDP growth rate was 5.6%. My response was pretty straightforward: stocks look good, but consumers are people. More than 27 million working age Americans are out of work or looking for more work. You can't have a confident consumer with a fifth of the labor force under- or unemployed.
The short story of the recession's labor market goes something like this. Employers who saw the recession bottom out in mid-2009 have started to restock (replenishing inventories contributed two-third of 2009Q4's 5.6% annualized growth rate). But they're making do with fewer full-time workers, more part-time workers, and record-low work hours. On the one hand, you could could argue the job market is wound like a tightly coiled spring waiting to pop, and our recovery could be a lot more rigorous than the naysayers expect. On the other hand, when the economy really picks up, employers have a lot of slack before they have to wade into the jobless market. They can raise hours from their record lows. They can hire the part-timers. Maybe that helps to explain why even after two quarters of positive economic growth, job openings are basically where they were a year ago.
We're moved beyond the hiring crisis, but we haven't moved beyond the firing crisis. Until we do, the consumer will continue to be grumpy.
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