Gross Domestic Recession
Despite rosier-than-expected second-quarter growth numbers, the U.S. economy remains on shaky ground. Strictly defined, the country may avoid recession. But as The Economist recently pointed out, this is of little consequence to everyday Americans:
To the average person, a large rise in unemployment means a recession. By contrast, the economists’ rule that a recession is defined by two consecutive quarters of falling GDP is silly.
Indeed, the unemployment rate has skyrocketed in recent months, rising a full percentage point since March to 6.1% with 9.4 million Americans currently unemployed. Economists agree that the stimulus package passed in February contributed to stronger second-quarter growth, but the economy-wide benefits are expected to be transitory and middle-class Americans, especially those who have lost their jobs or are in danger of losing them, have experienced little relief.
Congress helped to ease the burden on out-of-work Americans when it passed (and President Bush signed into law) an extension of unemployment insurance in June that added 13 weeks of unemployment benefits to the 26 weeks already authorized. However, the number of long-term unemployed continues to increase: 1.8 million Americans were jobless for 27 weeks or more in August, an increase of more than half a million in the past year.
Legislation introduced on Wednesday by Rep. Jim McDermott [D-WA] would extend these 13 weeks of unemployment insurance by an additional seven and permit a further 13 weeks of benefits in states in which the unemployment rate has risen above 6.0% (18 states and the District of Columbia would currently qualify).
The House is likely to attach this or a similar extension of unemployment benefits to a second $50 billion stimulus package it will take up later this month. The White House, however, is cool to the idea.
Passage of the package will be a struggle, but Congress and the White House would do well to recognize that the growing ranks of jobless Americans is the most accurate indicator of our economy’s declining health. But perhaps they would rather take the advice of the venerable Economist:
As the old joke goes: when your neighbour loses his job, it is called an economic slowdown. When you lose your job, it is a recession. But when an economist loses his job, it becomes a depression. Economists who ignore the recent rise in unemployment deserve to lose their jobs.