The Recovery's False Hope

Sure, sure, the economy's improving, but only by economists' standards. The Washington Post reports on why the new numbers show a "recovery only a statistician can love," as a Wells Fargo senior economist put it. For example, Tuesday's Labor Department report showed business productivity jumped to 6.3 percent in the second quarter, compared with the annual average of 2.6 percent from 2000-2008. Unfortunately, the spike in productivity came from businesses slashing hours, which reduced labor costs per unit, and consequently the buying power of workers, which will constrain already weak consumer spending. Slashed hours means that employers will have latitude to increase hours of their current staff, which may delay new hires. And while the unemployment rate edged from 9.5 to 9.4 percent in July as layoffs slowed, the numbers largely reflect the fact that 400,000 people dropped out of the labor force and weren't counted.