Krugman: 'This isn't a recovery'

If you're one of the un-recovered, this isn't news to you, but the Professor makes it official.

[T]his isn’t a recovery, in any sense that matters.

His column goes on to exhort his old boss, Ben Bernanke, to do more from the lofty Fed perch in advance of the big Jackson Hole meeting, because, etc., here's why.

But for me the take-away from this column is the number that gets Krugman to that conclusion. This number is important to keep in mind — in the same way that it's important to keep in mind it takes 150,000 new jobs per month to break even.

Krugman shows his work (my emphasis):

The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead.

So like with the 150,000 jobs number, it isn't zero that matters. Again — it takes 2.5% GDP growth to keep unemployment stable, and more to make it go down. Anything lower, and unemployment rises.

Now the reason that's important, and no, it doesn't have to do with Jobs. (Our Betters don't care about your Jobs, but you knew that, didn't you. Our Betters care about Productivity, which means Profit. Your Jobs actually get in the way, like buying paper for the copier gets in the way.)

Our Betters care about two magic numbers:

Dow above 10,000. The Dow is (1) a proxy for their investments, and (2) a stimulus for consumer spending. Dow up, consumer spending up, profits also up, roughly speaking.

(The difference between 10,000 on the Dow and 9,999 should be obvious; it's the same as the difference between $10.00 and $9.99 in the price of a book.)

GDP relative to 0% growth. If GDP is above 0%, the economy can be spun as "expanding" and the rubes can be told it's all good.

So let's follow their lead; but with help from the Professor, we won't be one of the rubes. We'll be watching:

Dow below 10,000 — because that's where they start to sweat.
GDP below 2.5% — because that's where we should sweat.

And that's it for today — no exhortation from me, no "state of the Krugman" this morning. Just a little numbers game; something to keep your eye on as the wheel of life spins by.

(As I write, it's been a tough week for the Dow; it's at 10,028 as I check. Our Betters, are they beading up yet?)

Numerically yours,

GP

UPDATE: According to Nouriel Roubini, third quarter growth is going to be "well below 1 percent." If it is, watch the spin, and keep 2.5% in mind.