Welcome to the Recover ... Eh

Do you like good news? If you do, this wasn't your month. Next month isn't looking good either.

After a disappointing past few months, June wasn't any better with 80,000 new workers.  To put that in perspective, the economy needs to add roughly 125,000 jobs a month just to keep pace with the growing population. We're sliding backwards off the economic treadmill, even though the headline unemployment rate was unchanged at 8.2 percent.

This isn't a blip. This is the way things are. And the more we zoom out, the worse things look. The second quarter of 2012 has been the worst quarter for job growth in two years. To quantify that, the economy added an average of 75,000 jobs a month in the second quarter -- compared with an average of 226,000 jobs a month in the first quarter.

At this rate, unemployment will come down to pre-recession levels approximately never. You can't even put numbers this bad into the Hamilton Project's jobs calculator -- which shows that we'd need to add 208,000 jobs a month to fully recover by 2020. Try it.

In other words, the economy needs more help. But with Congressional Republicans unwilling to negotiate on any kind of stimulus, that leaves the Fed as the only game in town. Ben Bernanke has hinted that the Fed might do more if more bad data came in. Well, this is bad data.

Here's some more bad data. The chart below from Bloomberg shows what markets think will happen to inflation in five years time.


I'll give you one guess what caused that fairly steep drop. Answers locked in? It was the bad jobs report. With growth stalling out, markets think inflation will too. Markets only expect 1.78 percent annual inflation over the medium-term. In other words, the Fed is failing on both its employment and inflation mandates. (Remember, it defines price stability as 2 percent inflation). It's true that it's taken much bigger drops in inflation for the Fed to act in the past -- but past errors don't justify repeating them. Inflation is too low and unemployment is too high. The Fed should do more.

It's been almost two years since Treasury Secretary Tim Geithner "welcomed" us to the recovery. Since then, the economy has grown. Just not enough to put people back to work. But it doesn't have to be this way. Our recovery that isn't worthy of the name is the result of deliberate policy choices. Congress and the Fed are far too happy with a recovery that has left 41 percent of the unemployed out of work for over six months.

It's long past due for our policymakers to welcome us to a new, better recovery.