Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University


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A Recovery in Reverse

by Ralph R. Reiland

They say the economy is moving in the right direction, that we should stay the course, be patient, that it takes time to pull out of the recession that began in late 2007.

Infact, things are getting worse.

Theeconomy was creating 153,000 new jobs per month last year. That dropped during the first seven months of this year to an average of 139,000 per month. InAugust, we were down to 96,000.

Ittakes over 100,000 new jobs per month just to stay even with the number ofpeople entering the labor force. It would take double that number for over adecade to bring today's jobless rate down to the unemployment levels of 2007.

Factorypayrolls were cut by 15,000 in August, the biggest decline in two years and astrong reversal of the 23,000 gain in factory payrolls in July.

The dipin the official unemployment rate from 8.3 percent in July to 8.1 percent

inAugust was due to 368,000 people dropping out of the labor force.

Thelabor participation rate, the share of the working-age population in the

laborforce (as either employed or unemployed), dropped to 63.5 percent in August,the lowest labor participation rate in over three decades.

This decline in the labor participation rate, the increase in dropping out, is due in large part to the extended duration of unemployment in the current economy. "The average length out of the job market continues to be a stunning 39 weeks,"reported The Wall Street Journal ("The Jobs Deficit," September 10, 2012),"compared to an average duration of between 15 and 20 weeks from 1984-2008."

Today'sunemployment rate would be 10.1 percent if the labor participation rate was the same as it was in February 2010, when the job market allegedly bottomed.

Andthat's not counting the officially estimated 8.0 million people who

wereclassified as "involuntary part-time workers" by the Labor Department in

August,i.e., workers with "hours cut" and people working part-time and "unable"

tofind full-time work, all not counted as unemployed.

Economic growth, too, is moving in the wrong direction. After expanding at an

annualrate of 4.1 percent in the fourth quarter of 2011, economic growth slowed

to2.1 percent during the first three months of 2012, and slowed again to 1.7percent from April through June of this year.

Ittakes double the 1.7 percent rate of growth to bring down the unemployment


Measuredagainst previous recessions and recoveries, federal reports show we're

doingabout half as well as average. "The Joint Economic Committee reports

thatprivate payrolls have climbed only 4.3 percent in the last 30 months compared to a rate of 8.3 percent over a comparable time period for the other nine recoveries since World War II," reports The Wall Street Journal.

Over the past year, the average annual wage increase of 1.7 percent was the

lowest increase in three decades, and too low to stay even with inflation.

Gasoline prices hit $3.80 per gallon on Labor Day, the highest price ever

recorded during a Labor Day weekend -- and double the $1.79 price on Inauguration

Day,January 20, 2009.

Retailfood prices rose 3.7 percent last year. This year, the U.S. Department

of Agriculture is forecasting a 3.5 percent to 4.5 percent increase in beef prices.

Theimpact of this failing economy on paychecks? Income data from the Census

Bureau show that the median household income, adjusted for inflation, dropped

by $4,019 from January 2009 to June 2012.


Ralph R. Reiland is an associate professor of economics and the B. KennethSimon

professor of free enterprise at Robert Morris University in Pittsburgh.


Ralph R. Reiland

Phone: 412-527-2199