Friday, August 14, 2009

Economic Recovery?

One might be confused that the Federal Reserve, many Private and Public Sector Economists, and many Pundits are reporting the Recession is over and Recovery has begun.

The question comes to mind: how in the world can a Recovery be underway with 9.4% published Unemployment rate (if you correlate the unprecedented 18% decline in Federal Tax Revenue with Unemployment, you likely get a real Unemployment rate of 15%) ?

The answer is: Jobless Recovery.

"Jobless Recovery" is counterintuitive. How can you have a Recovery without Jobs? Doesn't Recovery mean people are going back to work?

Yes, a Jobless Recovery is counterintuitive. However, it can be explained as follows:

(a) employed Human Capital, Physical Capital, and Financial Capital are recovering,

(b) unemployed Human Capital, Physical Capital, and distorted/constrained Financial Capital are not recovering.

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