Reader Poll:

Are We In the Midst of a Jobless Recovery?

by George Zobrist

The stock market is up — at least from the lows we experienced last summer — and interest rates are as low as they have been in the past two decades or more. But the question remains: are we in the midst of a jobless recovery?

In a recent Beige Book report, the Federal Reserve (the "Fed") states that the economic recovery has lost momentum. Most of the Fed districts are reporting modest growth or improvement, slow and uneven growth, or scattered signs of growth. They report little gain in the employment picture, however. The most recent jobless "picture" shows an unemployment rate of six percent, which did not change much in 2002. And while many discount stores were reporting relatively strong retail sales, many expected sales during the holiday season to be weak overall.

When the country's last recession ended in 1991, the economy grew less than 2.5 percent, and the unemployment rate kept rising; hence the term "jobless recovery." Experts say that the economy must grow at a rate greater than 3.5 percent annually to spur job growth. Many expect the growth rate for 2002 to wind up at around 2.5 percent — not enough to provide for job growth.  According to Mickey Levy, chief economist at Bank of America Securities LLC (The Washington Post, 09/17/02), "Recovery is proceeding, but businesses have been hesitant to start hiring."