Economy Gets Pause that Isn’t Refreshing

Dr. Joe Webb

Tuesday, June 7th, 2011

As discussed in blogposts, the economy was getting weak, and the latest data confirm that. Every one of our recovery trackers are above or equal to their levels at the recession on a current dollar basis. Those levels, however, are in some jeopardy because of a slowing economy, and inflation. If inflation-adjusted data are used, the NASDAQ is about 100 points below its inflation-adjusted level of December 2007, and proprietors income, our measure of small business activity, is down about -3.9% from those levels.

The outlook for June is not particularly good, based on the unemployment report of Friday, June 3. The unemployment rate edged up to 9.1%, the labor participation rate remained at a 25+ year low of 64.2%. Compared to May of 2010, 2.3 million people have left the labor force, which is actually making the unemployment rate seem better than it is. The household survey showed an increase of +105,000 jobs. The household survey includes self-employment, and is the survey used to calculate the unemployment rate. (The payroll survey gets all of the attention in the news, and much of it is undeserved; but that was well below the forecasts of experts). The broadest measure of unemployment that includes discouraged workers and part-time workers unable to find full-time work, fell slightly to 15.8%.

Productivity data for total business output was +3.2%, which still exceeds GDP growth (+1.8%), implying that no improvement to employment should be expected soon. The increased productivity is being used by businesses to pay for increased raw materials costs, additional costs of current and upcoming regulations, and investments in computing and communications. Unfortunately, the increased productivity is not going to workers, and has not been for almost a decade.

It's likely that economic slowdown will continue for the next few months. Those claiming that there will be a “double dip” recession are gaining more credibility, but they are likely to be incorrect. But +1.5% to +2.25% economic growth is nothing to write home about either, so the likelihood that the “double-dippers” will be wrong doesn't really matter at all. Throughout the recession and the recovery, the only thing certain is that the experts and policymakers have been consistently incorrect about their forecasts.

About Dr. Joe Webb

Consultant, entrepreneur, and economics commentator Dr. Joe Webb started his career in the industrial imaging industry more than 30 years ago. He found his way into business research, planning, marketing and forecasting executive positions along the way, as well as consulting for firms ranging from large multinationals to small businesses. Dr. Webb started an Internet-based research business in 1995, selling it to a multinational publisher in 2000. Since that time, his consulting, speaking, and research projects have focused on the interaction of B2B economics and technology trends. He is a doctoral graduate in industrial and corporate education from New York University, holds an MBA in Management Information Systems from Iona College, with baccalaureate work in managerial sciences and marketing at Manhattan College. He has taught in graduate and undergraduate business programs in a number of Northeast US colleges, and currently resides in Rhode Island.