Kudlow vs. Abelson on Jobs and the Economy

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We can always find a millionaire to shovel all the coal.
-- Tom Waits, "Clap Hands"

OK, I'm starting to get angry. It seems like everybody is saying this is the weakest economic recovery ever.

Case in point: Alan Abelson of Barron's points out that economist Paul Kasriel wrote a critical article on Larry Kudlow's piece last week in The Wall Street Journal. Kudlow was citing the evidence that the economy is doing great. Among Kudlow's evidence was the following:

• after-tax corporate profits are up 19.5%


• inflation-adjusted consumer spending is up 3.6%


• capital-goods investment by businesses is up 13.9%

And so on.

According to Abelson, Kasriel points out that the jobless rate has showed a much slower decline than the usual average postwar recovery. The average recovery decline in the jobless rate is 19.8%, notes Kasriel, as opposed to this recovery's 2.4%. Kasriel also says that the average postwar expansion rate in GDP has been 5%, as opposed to the 3.4% expansion in this recovery pointed out by Kudlow.

Apples and Oranges

Well, Kasriel is right. But I'm afraid he would get an F in Economics 101 for his analysis. Why can't he mention other things that make this recovery different from every other recovery?

Unemployment is one example. Yes, it's a shame that the unemployment rate can't match the 19.8% decline of other recoveries. But let's look at the full picture, something Kasriel and Abelson should have mentioned in their articles. This was the shallowest recession ever in terms of the effect on unemployment.

For instance, in this recession, the unemployment rate peaked around 6.3% about 18 months after the recession ended. (The unemployment rate always peaks in the year or so after a recession ends, as opposed to when a recession is going on.) Since then it's down to 5.4%, a decline of 8.5%. However, the increase to a 6.3% unemployment rate was the smallest of many recoveries we've had in the past several decades.

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