Sunday, May 10, 2009

What is an economic recovery?

The last big recession was in 1980-82 when unemployment hit a peak og 12.2% in November 1982. Unemployment is a lagging indicator and Washington state did not see unemployment below 8% for over three years after the peak. In 1983, economists proclaimed that we were in a recovery. Given the high unemployment, the question was, whose recovery?

Last Thursday, The Wall Street Journal compared the jobless safety net in the U.S. with Europe and concluded that we came up short. While the unemployment is currently at the same level in both the U.S. and most of Europe, American workers are facing a much more several loss in income as in Europe. Only roughly a third of U.S. workers get unemployment benefits and of those workers wage recovery average 44% and ranges only from 19-66%. In Europe, jobless benefits benefit nearly all workers and jobless benefits can pay up to 90% of lost wages.

The Journal and many economist opine that this is a bad thing that will slow their recovery.
But what does that mean? Exactly what is a recovery and what is an economy for? Isn't stability and prosperity the main objective of economic growth?

It might actually be worth taking a second look at the American safety net. Looking at today's New York Times cover story it appears not only inadequate but often arbitrary and certainly uneven depending on what state you live in.

What can we do to knit a more functional safety net in Washington State? Do all of our programs fit together? If you are without a job but don't have the hours to get unemployment benefits can other programs help? How does eligibility for food stamps, emergency housing, unemployment, training benefits compare? Is there a logic to all of the different requirements? Is everyone eligible or does it appear arbitrary or uncoordinated?

These are some questions we might want to focus on since unemployment probably won't peak again until growth actually starts to pick up late this summer and it is likely to remain high for a few years after that.

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