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It Ain't Over Till it's Really Over: Slow Growth Will Lead to Rising Unemployment in 2002

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Abstract:

According to economic forecasts, the recession will soon be over. These forecasts predict that the economy will start growing, albeit slowly, in the spring of this year. Most of the media coverage of the current recession has focused on this question of when it will end, as measured by a return to positive GDP growth.

But what these public discussions fail to take into account is that the terms "recession" and "recovery" mean different things to different people. For many forecasters, a recovery refers to the point at which the economy stops shrinking and begins expanding as measured in terms of gross domestic product (GDP), or the output of goods and services. Working families, however, tend to think of recessions more in terms of unemployment, reduced weekly hours, lower wage increases, and loss of family income.

From this perspective, a recovery begins when unemployment begins to fall, and this is likely to occur well after GDP reverses course. Absent an effective stimulus package, GDP simply will not grow fast enough to prevent increased unemployment.