Marketplace of Ideas Blog

First Trust Advisors’ Brian Wesbury and Robert Stein clarify what an economic recovery is:

We have never seen as much emotion in economic debate as we have in recent years. Part of this is driven by the Internet and the ability to post anonymously. But even that doesn’t explain everything because every week we get signed emails and blog posts with language that could make some grown men blush. …

Mostly, these writers question our sanity or integrity for predicting an economic recovery. The responses fall into three groups. First, those who think debt drove the wealth creation of recent decades and until this debt unwinds nothing will be normal again. These commentators expect more shoes to fall.

Second are those who just can’t see a recovery if people are losing their jobs. They say we missed forecasting the recession in advance and are wrong to expect a V-shaped recovery. Third are those who look at all the government spending and money printing and think this will undermine growth and boost inflation to painful levels very soon. …

Capitalism did not fail, it was government that failed. The government perhaps never better lived up to Groucho Marx’s maxim: “Politics is the art of looking for trouble, finding it, misdiagnosing it, and then misapplying the wrong remedies.”

Despite this, we expect the economy to rebound from the panic and make up for the loss of growth relatively quickly. This is hard for some people to comprehend because if you listen to the business news or read the popular press, the economy has basically stopped — had a heart attack — crashed — shut down.

But the system never shuts down. It may slow down, but as long as freedom exists, the system remains dynamic. For example, in the past 26 weeks, roughly 16 million people filed initial claims for unemployment insurance. But, as of two weeks ago, there were only 6.816 million people continuing to receive claims. In other words, possibly as many as nine million people who might still be receiving benefits are not because they found gainful employment.

The point of this is that the economy has not stopped. It is extremely vibrant and dynamic. In the midst of what some call “the worst economy since the Great Depression,” job creation continues. What is needed for an end to “net” job losses is for layoffs to stop. And with the panic subsiding this should happen relatively quickly.