When 2011 started, the economy seemed poise for takeoff. It wasn't just the optimists who said so. The Federal Reserve forecast that growth would speed up in the second half of the year, hiring would pick up, and the United States could begin – slowly – to lift itself out of the economic gloom.
Unemployment would fall a full percentage point in 2012 and another point or so in 2013.
Ten months on, the economy is still rolling down the runway and liftoff looks a long way off. Instead, Americans – from ordinary consumers to central bank forecasters – are hunkering down for a long and drawn out recovery.
In that environment, some analysts portrayed Friday's jobs report as a glass half full. The economy added 80,000 jobs in October, the Labor Department reported. That was somewhat less than expected. But with upward revisions of the two previous months adding an extra 102,000 jobs, some analysts reacted positively.
"The US economy continues to chug along in the face of all these headwinds," says Scot Melland, president and CEO of Dice Holdings, which runs specialized career websites in the technology, financial services, and health-care industries. "We've had 20 months in a row of jobs growth."
The unemployment rate also ticked down unexpectedly from 9.1 percent to 9.0 percent.
The problem is that these results look positive only because Americans don't seem to expect better anymore.
Exhibit 1) Consumer confidence last month fell to levels not seen since the depths of the Great Recession
Exhibit 2) One reason the unemployment rate declined in October was that the unemployed are so discouraged that they're not looking for work anymore and, thus, are no longer considered to be part of the labor force. At historic norms of worker participation, today's unemployment rate would be around 11.5 percent, instead of 9.0 percent, calculates Joshua Shapiro, an economist with MFR Inc. in New York.
Earlier this week, the Federal Reserve's open market committee, which sets interest rates, lowered again its economic projections for growth and employment. In January, the committee expected this year's growth to be between 3.4 and 3.9 percent. Now, it forecasts 1.6 to 1.7 percent.
Similarly, it expects 2012 growth to come in at between 2.5 and 2.9 percent (down from 3.5 to 4.4 percent in January) and 2013 to grow 3.0 to 3.5 percent (down from 3.7 to 4.6 percent). In other words, the Fed now thinks robust growth will be delayed by a full year.
That's a challenge for the nation because the longer it takes for the economy to lift off, the longer it will take to put Americans back to work.
After the so-called "jobless" recession in 2001, it took the US 19 months to recover the 3 million jobs it had lost. That was considered agonizingly slow at the time. Twenty months after the trough of employment caused by the latest recession, the US economy has recovered only a little more than a quarter of the nearly 8.8 million jobs it lost. And the rate of job growth is a third slower than the snail's pace of the jobs recovery after 2001.
At the current rate, it would take another 6-1/2 years – August 2016 – before the US would recover all the jobs it lost from the Great Recession. And that doesn't address the job needs of new entrants to the workforce.
The Fed now projects it won't be until 2013 that the unemployment rate falls by one percentage point below current levels. The 80,000 jobs added in October aren't nearly enough to bring the unemployment rate down, even if the totals were on par or better than what analysts had expected.
If you set the bar of expectations low enough, any jump looks good. American needs an employment boom, not a whimper.