Q: Why does it feel like the economy hasn’t recovered yet the stats say it has?

A:  Doing more with less.  In other words, increased productivity.

On one hand, the unemployment rate continues very high, which means there are lots fewer people working.  On the other hand, GDP has just passed the peak from before the recession, which means the size or value of the economy has recovered.

Check out this picture – it shows why you and I are confused: Chart of the Day: Structural Shift in U.S. Economy

Scales are adjusted so employment and real GDP are roughly aligned until the start of the recession.  Notice how real GDP turns around in 2009 and has been going up slowing since then?  Also notice how employment just kept dropping until 2010 and has improved slowly?  That’s why it feels so odd today – poor employment data with modestly good news on GDP.

Understanding how these two graphs fit together is the challenge.  Here is Mark Perry’s observation:

The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do “more with less (fewer workers).”

He thinks that it will take a while for employment to recover.

So, it is okay if you are confused by simultaneously hearing about high unemployment and the economy overall is at a peak. Both parts of that sentence are in fact happening at the same time.  The challenge is to make sense of it.

Then we can make some educated guesses on what will happen to donations from our supporters and demand for social services we provide to the community.

2 Responses to Q: Why does it feel like the economy hasn’t recovered yet the stats say it has?

  1. […] Mark J. Perry printed an update to his graph of the GDP and employment numbers at Chart of the Day: Structural Shift in the U.S. Economy.  I mentioned this graph earlier. […]

  2. […] Q: Why does it feel like the economy hasn’t recovered yet the stats say it has? […]

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