The government’s announcement on Tuesday that the economy grew even faster than expected makes the current ”jobless recovery” even more puzzling. To give some perspective, unemployment normally falls significantly in such economic boom times. The last time growth was this good, in 1983, unemployment fell 2.5 percentage points and another full percentage point the next year. That’s what happens in a typical recovery. So why not this time? Because we have more to recover from than we’ve been told.
The reality is that we didn’t have a mild recession. Jobs-wise, we had a deep one.
The government reported that annual unemployment during this recession peaked at only around 6 percent, compared with more than 7 percent in 1992 and more than 9 percent in 1982. But the unemployment rate has been low only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as ”not in the labor force.”
In other words, the government has cooked the books. It has been a more subtle manipulation than the one during the Reagan administration, when people serving in the military were reclassified from ”not in the labor force” to ”employed” in order to reduce the unemployment rate. Nonetheless, the impact has been the same.
And now, in 2011, we’re told the unemployment rate is about 8.8%, while it’s really somewhere around 22%. The economic policies pushed by that same Austan Goolsbee helped get us there! Funny, how that works.