[Futurework] That Ugly Disconnect Again

[Karen Watters Cole]

What, exactly, is a Mainstream Economist?  Do they have species markings, rituals, mating habits, regionalized habitat?  Endangered?  KWC Is There Such a Thing as a Jobless Recovery? By Alex Berenson, NYT, 01.26.03 @ http://www.nytimes.com/2003/01/26/weekinreview/26BERE.html A Wall Street maxim holds that the difference between recession and depression is that a recession is when your neighbor loses his job. A depression? When you lose yours.  That saying goes a long way toward explaining the disconnect between recent statistics showing that the economy as a whole is in decent shape, and polls finding that economic anxiety is gripping many Americans.   After falling into recession in 2001, the economy did indeed recover in 2002, hard as that is to believe.  Despite a sluggish fall, most economists believe the United States expanded at close to 3 percent last year (final statistics are still being compiled).   But because productivity — the amount of goods or services produced for each hour worked — is climbing relatively fast, last year's relatively tepid expansion created almost no new jobs.  Instead, businesses are finding ways to get more production out of each current employee. I n fact, the unemployment rate has risen from 3.9 percent in 2000 to 6 percent today.   "The single most important statistic that looks ugly and is concerning people is jobs, and we've created no jobs, in the aggregate, in this 11month recovery," said Donald Straszheim, the president of Straszheim Global Advisors and the former chief economist for Merrill Lynch.  "For most people, it's about a paycheck, and if you've got a job, you're O.K. And if you don't, you're not."   The lack of job growth is the downside of the productivity boom that began in the mid-1990's and still seems to be continuing today, said Brad DeLong, an economist at the University of California at Berkeley.  In the long run, higher productivity should be good for the economy, leading to broad increases in wealth.  But in the short term, it means that 2.5 percent annual growth, which in the late 1980's or early 1990's would have created lots of new jobs, now does not, he said.    "The kind of growth that previously gave us a rising employment environment now gives us a rising unemployment environment," Mr. DeLong said.   The possibility of war with Iraq and of new terrorist attacks is also depressing confidence levels, said Delos Smith, senior business analyst for the Conference Board, a nonprofit group that assesses consumer confidence each month. (Mr. Smith said much the same thing occurred before the Persian Gulf war, when the board's confidence index fell from 102 in July 1990 to about 55 in January 1991, when the allied bombing campaign began. After Iraqi forces surrendered and oil prices plunged, the index rose 22 points in a single month, an unusually large gain.)   The index now stands at 80.3 and is expected to fall into the mid-70's when January figures are released on Tuesday.  This would be lower than at any point since November 1993, at the outset of the long boom of the 1990's.   What role consumer confidence plays in the economy is a more complicated question.  Even Mr. Smith called the board's survey more of an "ambiance index" than a concrete guide to consumer spending.  Alan Greenspan, the chairman of the Federal Reserve, is known to believe that consumer confidence is of minimal importance to the economy.  He and others believe that, regardless of how they say they feel, most people will spend almost all the money they make.   But Stephen Roach, the chief economist at Morgan Stanley and one of the most bearish forecasters, said the increasing pessimism of consumers is troubling.  Mr. Roach has repeatedly warned that the United States faces the threat of deflation, which has gripped Japan's economy for the last decade.  "The American consumer has been the last gasp for the U.S. economy," Mr. Roach said. "If the consumer weakens further, there's not a whole lot left."   Most mainstream economists, however, are more optimistic than Mr. Roach and expect continued moderate growth this year.  But unless growth accelerates, Mr. DeLong said, "2003 doesn't feel good at all for the unemployed, and it doesn't feel very good for the employed."    In other words, this recovery is, to a lot of people, merely a statistic — several consecutive quarters of economic growth that, nonetheless, leave many people feeling as if they are in the midst of a recession.   Outgoing mail scanned by NAV 2002