Whatever the January unemployment numbers show when they are released in historical context, the U.S. has strong economic fundamentals that could help buffer it against a recession, or keep a recession short and mild, according to the Employment Policy Foundation.
“Because consumer confidence plays such an important part of economic health, it is important to put the recent spate of layoff announcements into perspective,” said EPF’s chief economist, Ron Bird. In December 2000, 957,000 permanent jobs were cut – which represents a loss of over 100,000 fewer jobs than were cut in December 1999, when the economy was merrily chugging along. Most job losses in December 2000 were either temporary layoffs – so-called furloughs – that are common in construction during winter and in some manufacturing operations when orders and inventories fluctuate temporarily. The permanent kind of layoffs reported were actually lower than at any time in the last seven years.
Even including people who said their temporary assignments ended in December 2000, the total number of lost jobs (1.5 million) was less than in December 1999, and also less than any December since 1973. The month of December, in general, is not different from other months from the standpoint of permanent job cuts – December 2000 was only slightly below the average (1.1 million per month) for all months in 2000 in terms of permanent job loses. As the job market has become generally tighter, the monthly average for permanent job losers has steadily declined and is now close to half of what it was in 1994.
Last year, an estimated 14.2 million people lost jobs from either cuts of permanent jobs or the end of temporary assignments; however, 15.9 million new jobs were created, meaning that all 14.2 million job losers were re-employed and 1.7 million new entrants to the labor force were also able to find work.
“The economy is at a crossroads now and we need to take a look at all the data before the picture becomes clear,” said Dr. Bird. “Tomorrow’s monthly unemployment report will be another important piece of the puzzle. Economic growth is clearly slowing, companies are reporting lower than expected earnings and people are concerned about their future job security, but it is too early to tell whether or not we will have a recession this year. The 1.4 percent growth of GDP reported yesterday encourages the thought that we may miss a full-blown recession just as we did in 1996 – and the Fed’s dramatic rate cut shows a commitment to keep the economy growing and banish pessimistic expectations.”
“We live in a dynamic economy,” he added. “To meet the demands of global competition and technological change, firms are constantly restructuring as well as expanding. The U.S. economy is stronger today than at the beginning of any downturn in the last 50 years – meaning that should a recession hit, it would likely be short and mild. Whatever numbers show, it’s better to get the flu when you’re otherwise healthy than to get the flu when you already have a cold.”
For more information at http://www.epf.org