Floyd Norris says that if the present recession looks like past ones, we should be in great shape, so put on a happy face…! (Ezra Klein has also been pushing economic happy thoughts.) This type of thinking should be acknowledged but not accepted because as we all know from the financial crisis that started this whole thing in the first place, the future is under no obligation to behave like the past. If it were, we’d still be fighting each other with rocks over mastodon meat. So Norris’s logic doesn’t necessarily hold, and there are a number of good reasons to think that it won’t.
For one, there’s continuing weakness in the labor market. Norris argues that employment is a lagging indicator, but it nevertheless remains true that the unemployment rate is 9.7%, that the hiring rate has stagnated, that 71% of all employers don’t expect to be hiring, that the hours worked per week, at 33.9, have been paddling near their all-time low, and that the number of underemployed Americans remains high. We also know that credit, whether to consumers or small businesses, remains low. We know that wages decreased by 0.1% in March. And furthermore, we know that the 160,000 workers hired in March is inflated by 48,000 census workers and that you need to add 150,000 workers per month to keep pace with population growth.
But wait, that’s not all! We know that the foreclosure crisis continues, as people are being evicted, which is a social disease that degrades everyone around it. In fact, the foreclosure rate rose in the fourth quarter of 2009.
So, if you're dealing with an indebted American worker, and wages and hiring aren't looking up, how is the weight of debt supposed to be shouldered?
We live in a globalized world, though—how is the rest of the world performing? We know that Greece is the first domino to fall in the Eurozone, and we know that markets have reacted skeptically to the ah, "bailout" plan being pushed by the EU. We know that the rest of the PIIGS are also in bad shape when it comes to sovereign debt. We also know that Eastern Europe that’s not in the Eurozone is in bad shape, sovereign-debt wise. In fact, there are legitimate fears of a debt spiral in many parts of the Eurozone. We know that China has a problem with non-performing loans. We know that financial speculators are pumping up African bonds, currencies and various commodities in the carry trade, a trade that's prone to a quick, nasty snap-back when interest rates rise. So we’re in bad shape there.
In fact, I see far more reasons for pessimism than optimism.