Public Comment

Is a Recession Coming, or Has It Already Arrived?

Harry Brill
Thursday October 17, 2019 - 10:05:00 PM

The main risk of asking the wrong question is that it most likely will yield the wrong answer. The headline caption in a recent San Francisco Chronicle article, for example, states that the "Nationwide jobless rate last month is at a 50 year low". The obvious question for those who view this as good news is how do we explain the favorable economic climate for working people. In the same article, a corporate VP provides his explanation. "We're still seeing strong demand, we're still seeing more job opportunities out there than candidates". Apparently this executive thinks that the economy is benefiting from the tremendous impact of spending by America's optimistic consumers.

But is the public really optimistic? Not according to the Conference Board, which is a business organization that surveys the public monthly on its views of the economy. The Conference Board's recent survey found that the percent of the public who expect business conditions to worsen has increased substantially. Surveys by the New York Federal Reserve and the University of Michigan also found a steep decline in public confidence.

Unfortunately, the public is right. Over 330,000 jobs were cut during the first six months of this year. Especially worrisome, this figure is a 35% increase from the same period last year. 

The massive cut in jobs by the business community is certainly not a unique event. With regard to job losses in the manufacturing industry, since the year 2000 jobs declined from 17.2 million to12.4 million by 2017. That's about a one third reduction. City Bank has recently laid off 10,000 employees. Tesla Inc, which manufactures electric cars and solar panels, laid off 3600 workers. And the private health organization, Tenet Health, gave pink slips to about 2,000 workers. Many workers who Tenet Health dismissed received only a two day notice. Clearly, Tenet Health is unconcerned with the possible health implications of its abrupt action. 

In addition to these losses, there has been another disturbing development. Employers have not only been eliminating a tremendous number of jobs. They have been converting many more full-time jobs into part-time positions, which are low paying and generally offer no benefits. As a result a growing number of workers are compelled to work part-time for poverty wages because they are unable to obtain full- time work. 

Consider the statistical implications of counting these jobs. Splitting one job into two or more jobs is interpreted as good news by the Department of Labor's Bureau of Labor Statistics ( BLS) because it appears as an increase in the number of jobs in the labor force. Particularly important this maneuver lowers the official unemployment rate.  

So the question "Is a recession coming" seems to be a reasonable one except the future tense may be wrong. We do know that current layoffs are substantial.  

Also, jobs are hard to get, particularly decent paying jobs. That's because there are on average for each corporate job opening at least 250 applicants. When describing labor market conditions, then, we should be using the present tense. For millions of working people the recession has already begun.