Recent data has disappointed analysts and investors who were hoping that the economy and the employment picture would continue to show some marked improvement. Now the economic data, specifically the non farm payroll data, has taken a turn for the worse again. There is no doubt that this is bad news for the chances of a recovery, and almost everyone does realize this fact. A person without a job isn’t going to be spending money to help out the overall economy, because they are going to have save every single penny they can just to make ends meet.
Recently some of the most bullish economists or stock strategists have suggested that we may well be on our way to having a “jobless recovery.” What exactly is a jobless recovery anyways? A jobless recovery generally occurs when Gross Domestic Product returns to a normal state, but it does so without the aid of new job creation or putting people back to work that have lost their jobs during the downturn. Basically in a jobless recovery the economy begins to recover, but the average individual doesn’t see a change in their ability to find a job. During a jobless recovery businesses may start to spend more or invest more money, which causes the economy to grow without new jobs coming into the system.
Why is a jobless recovery unlikely? Jobless recoveries are generally not a long-term solution to the problem because in the end it does indeed take employment to recover to make the economy go into a lasting and meaningful upward move. I tend to believe that jobless recoveries are not so much recoveries so much as they are temporary upward blips. Consumer confidence is needed in order to get individuals spending, and no one is going to be confident with a bleak employment outlook.
While the whole notion of a jobless recovery may sound like it makes a lot of sense, do realize that if this type of recovery happens, it is unlikely to last or be a real recovery. Once the employment picture starts to turn around then will be the time that the economy can begin to turn for real. Until the day comes that individuals in this country can feel more confident about the employment picture we shouldn’t hold our breath for a real economic recovery. You’ll hear plenty about jobless recoveries in the coming quarters, but you should think twice before you believe that hype. It really is basic economics, jobs equals confidence and confidence equals spending and a healthy economy.