Lowering the Bar: Reuters Sets 2.5% GDP Growth as Unemployment Rate-Lowering Benchmark
I guess at Reuters, when you see that an economy can't meet normal benchmarks for success, you simply lower them, and pretend that success will come anyway.
Over at the Associated Press a few weeks ago, in his write-up in the wake of the government's awful June employment report, Chris Rugaber correctly pegged the kind of economic growth it will take to get millions of currently unemployed Americans back to work again: "The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate."
That standard was way too high for whoever wrote an unbylined item at Reuters on Tuesday (bold after title is mine):
Weak auto output, pricey gasoline to clip Q2 growth
WHAT: First reading on U.S. second-quarter GDP
WHEN: Friday, July 29, at 8:30 a.m. EDT
FACTORS TO WATCH
A contraction in motor vehicle production because of a shortage of parts from Japan and high gasoline prices that curbed consumer spending, probably kept the U.S. economy on a slow growth path in the second quarter.
Growth in the world's biggest economy is projected to have weakened to a 1.8 percent annual rate after a tepid 1.9 percent pace in the first three months of the year.
The economy would need to grow at a rate of 2.5 percent or better on a sustained basis to chip away at the nation's 9.2 percent unemployment rate.
The trouble is, as seen here, GDP growth has averaged an annualized 2.8% in the seven quarters since the recession as normal people define it ended in the second quarter of 2009, while the unemployment rate chip-away has been minimal:
By contrast, also seen at the linked graphic, average annualized growth during the first seven quarters of the early 1980s recovery under Ronald Reagan was 6.6%. Not coincidentally, employment grew by almost 5.3 million during those seven quarters (the equivalent of about 8 million today), and the unemployment rate dropped from 10.1% to 7.2%.
My message to Reuters: Chip, schmip. We won't get to an unemployment rate of even 7% for 15 years at the current rate of "chipping" (2.2% required seasonally adjusted drop from the current 9.2% divided by average seasonally adjusted drop of 0.15% per year since the recession ended).
The not seasonally adjusted table indicates that the June 2011 jump in actual, on-the-ground unemployment was as bad as June 2009's. That would appear not to bode well going forward. After the same thing occurred two years ago, the seasonally adjusted rate jumped by over a half-point during the next four months. During that period, GDP growth average an annualized 1.6% in the third quarter, and 5.0% during the quarter containing October, or an average of 2.45% over four months, i.e., just under Reuters' alleged benchmark of 2.5%. A lot of good that level of growth did then. That kind of growth won't do us much good now either, no matter how far Reuters lowers the bar.
Cross-posted at BizzyBlog.com.