Bill McBride at Calculated Risk shows an extended version of this chart:
This shows the depth of the recent employment recession – worse than any other post-war recession – and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.
The “housing bust and financial crisis” has become the ‘snake-oil’ of this recession in that it is used to explain both its depth and the (extremely) slow recovery.
But Bill says more:
This was a solid(!) employment report, and including revisions, in line with expectations.
Let´s narrow our focus to the last four cycles (1982, 1990, 2001 and 2007) and consider the 25 quarters from the start of the respective recessions.
The panel below gives some hints about what´s really holding back the recovery in the present cycle.
First look at the ordering of the rise in nominal spending (NGDP). It´s quite a good “fit”. Left to be explained is the identical rise in NGDP in the 1990 and 2001 cycles associated with very different employment gains on the two occasions. An explanation can be gleaned from the stellar behavior of productivity in the 2001 cycle.
From the PCE-Core chart it appears inflation is an “animal at risk of extinction” and despite recent worries, nominal wages have been rising much less rapidly than in the previous cycles.
Bottom Line: It seems the Fed wants to wait for inflation to be “dead in the water” (a flat price line) before it considers actions that will speed spending and increase employment.