THE AVENUE SEPTEMBER 10, 2009
The Federal Reserve’s latest Beige Book, released yesterday, painted a cautiously optimistic portrait of the state of the nation’s economy. The New York Times, reporting on the Beige Book, heralded a “slow and still fragile recovery” that is “taking hold across the country.” But even if the data bear out this anecdotal assessment, don’t think that a robust recovery is going to appear in your metro area anytime soon. Here’s why:
- In many parts of the country there are few signs of recovery. Of the 12 Federal Reserve districts, only Dallas (covering Texas and parts of Louisiana and New Mexico) reported that economic activity had firmed up compared to two months ago, according to the Beige Book. The Boston, Philadelphia, Richmond, Cleveland, and San Francisco districts (covering New England, the mid-Atlantic, part of the Great Lakes, the Intermountain West, and the West Coast) mentioned “signs of improvement.” That’s as good as it gets. The St. Louis district (covering parts of the mid-South and lower Midwest) reported a slowing of the pace of decline, not an improvement in economic conditions. And the districts covering the rest of the nation (large swaths of the Great Lakes, upper Midwest, Great Plains, and Southeast) reported only stability, not improvement.
- The jobs picture is still getting worse and will probably take a long time to recover. The labor market is where working Americans feel the impact of recession and recovery, and here there is little cause for optimism. In August the nation lost jobs for the 20th consecutive month, making the string of monthly job losses during this recession the longest since data were first collected in 1939. (The best that can be said about this is that the rate of job loss declined. More on that next week.) The unemployment rate hit 9.7 percent, its highest level in 26 years. The Congressional Budget Office expects the unemployment rate to hit 10 percent next year and to remain above 5 percent for several more years, even once the recession is technically over.
- Recovery may not last long. Economic recovery doesn’t necessarily mean a return to another decade of economic growth. A second recession can follow quickly on the heels of an economic upturn. We’ve seen such “double-dip” or “W-shaped” recessions before—in 1980-82 and, before that, during the Great Depression. Without a sustained source of long-term economic growth, we could see one again.
As Paul Krugman pointed out, the U.S. economy may well be in a recovery (technically speaking) but that’s irrelevant. For the next year and maybe longer, it isn’t going to feel like a recovery in much of the nation.