Skip to main content

What if the economic recovery is doomed?

By David Frum, CNN Contributor
updated 2:47 PM EST, Mon December 9, 2013
STORY HIGHLIGHTS
  • David Frum: Despite talk of economic improvement, we're still making up for recession
  • As people still seek to get back to work, the economic cycle could head south again, he says
  • He says the economy's ability to recover and generate plentiful jobs has been weakened

Editor's note: David Frum, a CNN contributor, is a contributing editor at The Daily Beast. He is the author of eight books, including a new novel, "Patriots," and a post-election e-book, "Why Romney Lost." Frum was a special assistant to President George W. Bush from 2001 to 2002.

(CNN) -- According to the statisticians, the U.S. economy has been expanding since June 2009.

Yet for millions of unemployed, the recovery has not even begun.

Even today, 4½ years after the economy touched bottom, 1.3 million fewer people are working than in 2007. At the recent pace of job creation, not until August 2014 will as many Americans be working at nonfarm payroll jobs as were working before the recession of 2008-2009.

David Frum
David Frum

It's getting late. And it's getting dangerous. Since World War II, economic expansions have averaged 58 months between recessions. January 2014 will be month 54. Could another recession arrive before we've put back to work everyone who lost a job in the last recession? The answer seems almost certainly: yes.

Recessions can occur for three main reasons:

1) The monetary authorities tighten money to squelch inflation.

2) Some external event jolts the economy.

3) During an expansion, investors build too much capacity, suddenly realize they've overbuilt and abruptly cut back.

Economic impact of November jobs report

In real life, more than one of these events can happen at once. The 1974-75 recession was caused both by the oil shock of 1973 and by interest-rate tightening to fight inflation. The 2001-2002 recession was caused both by the terror attack of 9/11 and also by a sudden end to the surge of Internet investment.

Recessions can be made worse by financial mistakes. The United States hugely over-invested in housing between 2002 and 2007. Financial institutions then packaged the loans in ways that hyper-charged what could have been an ordinary downturn in the U.S. housing market into a global financial debacle.

Each and any one of causes 1, 2 and 3 could well occur in the near future.

All this talk of Federal Reserve "tapering" is code for tightening money. When the Fed does finally execute its taper, the economy could slump. We live in a big world full of potential nasty events. And after five years of ultra-cheap money, investors and affluent Americans have overextended themselves in all kinds of ways. The U.S. stock market especially looks dangerously overbought.

Not since 1937 have Americans suffered a second burst of job losses before all the unemployed of the previous round were put back to work. Yet it seems almost inevitable that such a recession-before-full-recovery will strike sometime in the next few years.

To put it bluntly: The great American job machine is breaking down.

After the severe recession of 1974-75, then the worst since World War II, it took only 10 months for the total number of people employed to recover to the pre-recession peak. In no recession between 1945 and 1990 did it ever take longer than 11 months to put everybody back to work.

Since 1990, however, job recovery after recessions has proceeded much more slowly. It took fully 21 months for employment fully to recover from the recession of 1990-91, 18 months for employment fully to recover from the recession of 2001-2002.

Fortunately, both recessions were comparatively mild. The total number of jobs lost was not hugely great, and so the slow pace of employment recovery affected comparatively few people.

But what if the United States suffered both a deep recession and a slow job recovery? Before 2007, few imagined such a possibility. Today, that's our new reality: a slump deeper than anything seen since World War II and a pace of employment recovery slower than anything seen since World War II -- and all with another recession slowly coming due.

Follow us @CNNOpinion on Twitter.

Join us at Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of David Frum.

ADVERTISEMENT
Part of complete coverage on
updated 6:03 PM EDT, Tue August 19, 2014
It used to be billy clubs, fire hoses and snarling German shepherds. Now it's armored personnel carriers and flash-bang grenades, writes Kara Dansky.
updated 1:27 PM EDT, Wed August 20, 2014
Maria Haberfeld: People who are unfamiliar with police work can reasonably ask, why was an unarmed man shot so many times, and why was deadly force used at all?
updated 5:52 PM EDT, Mon August 18, 2014
Ruben Navarrette notes that this fall, minority students will outnumber white students at America's public schools.
updated 5:21 PM EDT, Tue August 19, 2014
Humans have driven to extinction four marine mammal species in modern times. As you read this, we are on the brink of losing the fifth, write three experts.
updated 7:58 AM EDT, Tue August 19, 2014
It's been ten days since Michael Brown was killed, and his family is still waiting for information from investigators about what happened to their young man, writes Mel Robbins
updated 1:23 PM EDT, Wed August 20, 2014
Sally Kohn says the Ferguson protests reflect broader patterns of racial injustice across the country, from chronic police violence and abuse against black men to the persistent economic and social exclusion of communities of color.
updated 8:42 AM EDT, Mon August 18, 2014
The former U.K. prime minister and current U.N. envoy says there are 500 days left to fulfill the Millennium Goals' promise to children.
updated 9:10 AM EDT, Mon August 18, 2014
Julian Zelizer says the left mistrusts Clinton but there are ways she can win support from liberals in 2016
updated 1:38 PM EDT, Wed August 20, 2014
Peter Bergen says the terror group is a huge threat in Iraq but only a potential one in the U.S.
updated 1:34 PM EDT, Sat August 16, 2014
Mark O'Mara says the way cops, media, politicians and protesters have behaved since Michael Brown's shooting shows not all the right people have learned the right lessons
updated 11:23 AM EDT, Sun August 17, 2014
Retired Lt. Gen. Mark Hertling says the American military advisers in Iraq are sizing up what needs to be done and recommending accordingly
updated 3:41 PM EDT, Fri August 15, 2014
Marc Lamont Hill says the President's comments on the Michael Brown shooting ignored its racial implications
updated 5:46 PM EDT, Fri August 15, 2014
Joe Stork says the catastrophe in northern Iraq continues, even though many religious minorities have fled to safety: ISIS forces -- intent on purging them -- still control the area where they lived
updated 6:26 PM EDT, Thu August 14, 2014
Tim Lynch says Pentagon's policy of doling out military weapons to police forces is misguided and dangerous.
updated 9:15 AM EDT, Fri August 15, 2014
S.E. Cupp says millennials want big ideas and rapid change; she talks to one of their number who serves in Congress
updated 7:57 PM EDT, Thu August 14, 2014
Dorothy Brown says the power structure is dominated by whites in a town that is 68% black. Elected officials who sat by silently as chaos erupted after Michael Brown shooting should be voted out of office
updated 7:49 AM EDT, Thu August 14, 2014
Bill Schmitz says the media and other adults should never explain suicide as a means of escaping pain. Robin Williams' tragic death offers a chance to educate about prevention
updated 11:05 AM EDT, Fri August 15, 2014
Nafees Syed says President Obama should renew the quest to eliminate bias in the criminal justice system
updated 4:24 PM EDT, Thu August 14, 2014
Eric Liu says what's unfolded in the Missouri town is a shocking violation of American constitutional rights and should be a wake-up call to all
updated 3:22 PM EDT, Wed August 13, 2014
Neal Gabler says Lauren Bacall, a talent in her own right, will be defined by her marriage with the great actor Humphrey Bogart
updated 6:56 AM EDT, Fri August 15, 2014
Bob Butler says the arrest of two journalists covering the Ferguson story is alarming
updated 4:35 PM EDT, Wed August 13, 2014
Mark O'Mara says we all need to work together to make sure the tension between police and African-Americans doesn't result in more tragedies
updated 4:06 PM EDT, Mon August 18, 2014
Pepper Schwartz asks why young women are so entranced with Kardashian, who's putting together a 352-page book of selfies
updated 7:08 PM EDT, Wed August 13, 2014
Michael Friedman says depression does not discriminate, cannot be bargained with and shows no mercy.
updated 11:25 AM EDT, Tue August 12, 2014
LZ Granderson says we must not surrender to apathy about the injustice faced by African Americans
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT