Making Sense of News on the Economy

If the Great Recession is over, as many experts believe, why is the US still losing jobs? The nation lost 190,000 jobs in October – the 22nd straight month of job declines – according to US Bureau of Labor Statistics data released today. This news comes after data released last week showed that the economy grew in the third quarter of 2009 for the first time in more than a year, prompting many analysts to declare that economic recovery had begun. These two seemingly contradictory pieces of news have led to questions about how the US economy can expand, but still lose jobs. The answer is that a single quarter of relatively strong economic growth simply isn’t enough to turn around the labor market. Nobel prize-winning economist Paul Krugman recently estimated that eight years of growth at the same rate at which the economy expanded in the third quarter would reduce the nation’s unemployment rate “from…9.8 percent [in September] to a still uncomfortably high 6.3 percent.” The bottom line is that this recession was so severe that it will take strong and sustained economic growth to bring the jobless rate back down to where it was before the downturn began.

Full recovery from the recession may be a long way off, but the good news is that the economy has taken the first step toward recovery, thanks in large part to provisions in the American Recovery and Reinvestment Act (ARRA). Estimates by several forecasters suggest that the economy would have expanded very little – or not at all – in the third quarter if it weren’t for the impact of the ARRA. Other good news is that today President Obama signed legislation to extend unemployment insurance (UI) benefits by an additional 20 weeks in states with high jobless rates, such as California. This measure will help tens of thousands of jobless Californians who have exhausted or will soon exhaust their UI benefits make ends meet a while longer.

— Alissa Anderson

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