ARE WE THERE YET?

Are we there yet? “There”—as in where we’ve supposedly been heading for several months, if not longer. “There”— as in some destination dreaded by millions. “There”— as in that state of being where our friends, loved ones—and even ourselves— start to take on water and sink beneath the choppy waters of joblessness. “There”— as in where the cards start to tumble, and folk begin to lose their grip. “There”— as in a recession.

Are we “there” yet?

Well, according to some, we’re definitely “there” already, and that perspective is largely grounded in recent declines in our Gross Domestic Product (GDP) during the first two quarters of this year: Drops of 1.6% and .9%, respectively. Lost in the chatter, and the incessant noise from people predicting inevitable doom, is the fact that the “two consecutive quarter declines” in GDP is, at most, nothing more than a rule of thumb.

Determining whether the economy is sliding into or is actually in, a recession requires an analysis that goes beyond a singular focus on GDP. The official arbiter or scorekeeper of whether the economy is in a recession is the National Bureau of Economic Research (NBER). The NBER’s Business Cycle Dating Committee defines a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

In other words, assessing whether we’re “there” yet requires looking at the movement in a variety of variables, including, for instance, unemployment, personal consumption expenditures, and payroll employment. While GDP—the monetary value of all the goods and services produced within the country during a given time period— is part of the “mix,” so to speak, it ought not to be fetishsized as the sole determinant of whether or not that we—the economy— is that proverbial creek.

Here’s what you get what you get, for instance, when you take a quick peek at one of those aforementioned variables—namely, the nation’s jobless rate.

TAKING A PEEK AT THE MOST RECENT UNEMPLOYMENT FIGURES

If we—the economy— are in a recession, what direction would you expect the unemployment rate to be going? Up, right?

Well, the exact opposite is occurring. The aggregate unemployment rate is going down, not up.

The top line of the Bureau of Labor Statistics’ most recent Jobs Report is straight up jamming: During the month of July, the economy added 528,000 gigs and the aggregate unemployment rate declined from 3.6% to 3.5%. That 528,000 figure, by the way, follows the previous month’s net job increase of almost 400,000. Over the past four months, the monthly increase in jobs has averaged 388,000. However you cut it, when it comes to the quantity of jobs being generated, the labor market is popping.

That same report BLS shows that average hourly earnings increased 0.5% during the past thirty days and are up 5.2% over the past year (note: that’s still lower than the rate of inflation; so, in real terms, workers are earning less, not more).

And, by the way, that job increase has been widespread, with leisure and hospitality, (96,000 gigs), professional and business services (89,000), and health care (70,000) leading the pack.

NOPE. WE’RE NOT THERE YET!

So, nope, we’re not there yet. We— the economy— are not in a recession. None of this means, of course, that things are anywhere near perfect. After all, the most recent Jobs Report—the one showing that there’s been an increase of 528,000 jobs during the last thirty days and a drop in the unemployment rate from 3.6% to 3.5%— also shows that the Black unemployment rate increased from 5.8% to 6%.

Clearly, there’s a persistence of racial disparities in the labor market. We’re the first to be hit by an economic crash and the last to be able to experience the effects of a any recovery. And it’s wise to bear in mind that there’s always a lot going on beneath the surface of aggregate figures like the overall unemployment rate.

Still, it’s nonsense to claim that we’re now in the midst of some generalized recession. In a generalized recession, unemployment rates go up and hourly pay heads in the opposite direction; that is, down. down. Both of these—unemployment rates and hourly earnings— are doing the exact opposite of this: The aggregate unemployment rate is going down, not up and the hourly pay is going up, not down.

Sure, GDP has declined for the last two quarters, but the fact of the matter is that the labor market is jamming too much to say that the economy is in a recession.

So, again, we’re not there yet.

But we could. And if we do, it’ll be in no small part due to the Fed’s determination to cool a labor market down that they consider to be running too hot. That 528,000 job increase, along with the upward tick in hourly pay, will be a lot for the Fed to swallow. These are the type of numbers that will make them gag and respond by initiating yet another increase in their benchmark interest rate. The danger is that at some point these large rate increases will put a chokehold on the economy, slow down economic activity, and increase the level of joblessness.

Keep your eyes open and your head up.

We’re not out the woods, yet.

Catch you on the flip side,

Doc Greene