2011: Economic Recovery or More of the Same?

December 21st, 2010 at 11:58 am | 60 Comments |

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If the economy improves in 2011, the surest sign of this might be an increase in the unemployment rate. That is not a typo. An increase in the unemployment rate could be an indicator that the economy is improving and that a recovery is taking place. This will be one of several indicators to keep in mind as 2011 unfolds and Americans (and pollsters for both parties) wonder whether or not this is the year that the economy shows signs of recovery.

A higher unemployment rate could mean that the workforce participation rate has increased. The unemployment rate measures how many people who consider themselves in the workforce are actively looking for jobs. However, if someone decides not to even look, they don’t count. This is why a student who decides to go to graduate school, or a parent staying at home with children, is not “unemployed.”

As Eli Lehrer of the Heartland Institute pointed out, “One enormous strength of the US economy is that our workforce participation rate is higher than that of other OECD countries.” However, it is currently lower than its usual highs. If more people think they have a chance to work, then they may reenter the job hunt, and workforce participation could increase. A higher unemployment rate, possibly 10%, would reflect the larger size of the pool of workers who think they could get jobs.

Of course, more interest in work doesn’t mean that the fundamentals of the economy are strong and that the nation is in a durable recovery. Economist Douglas Holtz-Eakin noted two key sectors that he will be paying attention to. First, the business community. Here, his focus will be on “investment, production of durable equipment, construction, and capital goods orders.” The other main area of attention will be exports, and the trade accounts.

His own personal expectation is that the recovery will be a slow and long one, with GDP growth in 2011 hitting close to 2% or 2.5%.

Inflation has also been a topic that FrumForum has been highlighting as a way to judge the progress of the Fed’s monetary stimulus.

Even if a recovery does take place, there will still be questions about whether it is masking deeper structural issues. So far, there are not many voices talking about a quick and easy turn around.




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60 Comments so far ↓

  • WillyP

    f_grey,
    I provided you with a link to extensive account about the Nazi economy, written by (matter of fact) a member of the Communist party. I read the book myself, and I think you will find it instructive.

  • F_Grey_Parker

    Dear Mr. Palumbo

    I read Reimann’s book 20 years ago… in college. It is the impassioned work of a self-loathing partisan and should be viewed accordingly.

    You have failed to thoughtfully address, much less respond to, ANY of the points in my previous post. Perhaps when you are no longer a “Young Republican,” you will cease to parrot the points that please you and debate independently.

    When you are ready to argue from experience rather than spouting the rote platitudes towards which you engage in idolatry ( and at such time as you actually bring evidence when confronted with nettlesome facts as opposed to suggesting, again, that I drown myself in a political manifesto ), I will resume the discussion.

    Having compared me to Hitler, Mussolini and “money grubbers,” it with no small disdain that I dismiss your childish scribblings as well as your failure to support your theses.

    To borrow from my own work, your Randian devotion to mid-20th century concepts of the “free market” is no less naive than a first year college student pontificating about the glories of pure socialism. It is gamesmanship of a sort we should expect in children but ought refuse to tolerate in adults.

    You have offered not ONE solution to the problems that confront us accept “taxes=bad=no freedom=Hitler.” This is not a philosophy. It’s not even a pamphlet. It’s barely a placard at a picket.

    Good day.

  • WillyP

    Briefly,
    What kind of a statement is “It is the impassioned work of a self-loathing partisan and should be viewed accordingly.” Are you a scholar who has researched Reimann? What evidence do you offer? Why should I believe you over a distinguished, apparently very honest citizen?
    http://en.wikipedia.org/wiki/G%C3%BCnter_Reimann
    “In 2004, Reimann was awarded Germany’s Officer’s Cross of the Order of Merit, the nation’s highest civilian award.”

    You have an issue with Thomas Sowell. I’m sorry that I am not going to expend my own time defending Prof. Sowell. I assume he has done this well enough in his 48 books on Marxism, economics, racial history, history of thought and economics, and thousands of newspaper columns.

    Hitler and Mussolini, Lenin and Stalin had more in common than not. They weren’t Liberals in the old sense, obviously. They were socialists. They were statists. Don’t tell me this is “Beck talking.” Give me a break. This is how a classical liberal speaks, who believes in private property, limited government, spontaneous order, the civil society, and traditions. If you can’t figure out that Beck is simply popularizing Old Liberalism, and Capitalism, well, there you go. He’s popular because the ideas are popular and effective. They make sense, promote peace and prosperity, and relieve the citizens of the terrible burden of always being excoriated or chastised by their (largely) worthless legislators.

    Some young turk who is mouthing off proposed government intervention after government intervention is just as stupid as an old bag mouthing off the same litany of interventions. When you’re literally against the entire history of Western civilization, proposing collectivist solutions, allegedly based in science but in fact based on a warped understanding of science, I don’t care how old you are, what color your skin is, what you have between your legs, or anything else but the idiocy of your argument. Wrong is wrong, whether it comes from Doogie Houser or Methuselah, Daffy Duck or Albert Einstein.

    You want to know what I would do to “fix” the economy? LIGHTEN THE GOVERNMENT LOAD. Cut spending significantly. Cut taxes significantly. Cut cut cut. The government is bloated and out of control. It regulates everything from cars to healthcare to light bulbs to toilets to emissions to food to drugs to death. It’s completely beyond what it was even 15 years ago, and and it’s impact is overwhelmingly negative.

    It created a massive housing bubble through regulation, bureaucritization, credit inflation, and a convoluted moral dilemma consisting of ratings agencies and loan originators. It has funneled literally trillions of taxpayer $$$ to foreign companies. It has seized control of the health insurance sector, causing costs to rise (surprise!) and created the inevitability for more taxation. Debt is reaching a point of no return. It now has its nose in the tent to regulate one of the few free areas of society – the internet.

    You say “To borrow from my own work, your Randian devotion to mid-20th century concepts of the “free market” is no less naive than a first year college student pontificating about the glories of pure socialism.”

    Thanks for assigning me a “Randian” devotion to free markets. I’m not sure what to say to this, except that a) I’ve only read Rand’s The Fountainhead, b) Even if I did have a Randian devotion to free markets, it would be far more intelligent than a Krugmanian devotion to Barack Obama, and that c) Frankly, I prefer Hayek.

    And all I get from you, Mr. Parker, is that Gunther Reimann was “self-loathing partisan.”

    Well golly-gee. If in your old age this is what passes for wisdom and smarts, I’m happy I’m young, inexperienced, and stupid.

  • JonF

    Re: Hitler controlled industry, as did Mussolini. Both were adored by leftist intellectuals until the bombs began to fall.

    I can’t let this pass. Hitler was hated by the Left because he persecuted the German socialists. If you want to convict the 30s Left of hero worship for tyrants there’s an even richer target to the East, since many leftists were absolutely gaga for Stalin.

  • Watusie

    LOL – I guess we can add “The Spanish Civil War” to the list of things Willy knows nothing about.

  • WillyP

    Back to the topic, we’re lucky – LUCKY – if 2011 is the same as 2010 economically. I suspect things will take a turn for the worse, as the largest financial institutions are truly insolvent, real estate is still liquidating (in slow motion), and Europe is coming to grips with its spreading debt problems.

    If things don’t take a severe turn for the worse, we’ll be in a quasi state of turmoil, which is exactly where interventionism leads. Always a new crisis lurking. The product of state economic control.

    http://mises.org/etexts/mises/critique/contents.asp

  • Non-Contributor

    *yawn*

  • Nanotek

    Noah,

    It’s been reported that $2 trillion in municipal bonds may be defaulting … economics is not my strong suit at all but I’d think that is a wrench in the gears to this analysis.

  • Nanotek

    “I suspect things will take a turn for the worse”

    ditto

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