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 12:24 PM EDT, Sat September 20, 2014
John Sutter boarded a leaky oyster boat in Connecticut with a captain who can't swim as he set off to get world leaders to act on climate change
updated 7:22 PM EDT, Fri September 19, 2014
Is ballet dying? CNN spoke with Isabella Boylston, a principal dancer at the American Ballet Theatre, about the future of the art form.
updated 5:47 PM EDT, Fri September 19, 2014
Sally Kohn says it's time we take climate change as seriously as we do warfare in the Middle East
updated 9:02 AM EDT, Fri September 19, 2014
Dean Obeidallah says an Oklahoma state representative's hateful remarks were rightfully condemned by religious leaders..
updated 3:22 PM EDT, Fri September 19, 2014
No matter how much planning has gone into U.S. military plans to counter the Islamic State in Iraq and Syria, the Arab public isn't convinced that anything will change, says Geneive Abdo
updated 11:44 AM EDT, Fri September 19, 2014
President Obama's strategy for destroying ISIS seems to depend on a volley of air strikes. That won't be enough, says Haider Mullick.
updated 9:03 AM EDT, Fri September 19, 2014
Paul Begala says Hillary Clinton has plenty of good reasons not to jump into the 2016 race now
updated 11:01 AM EDT, Fri September 19, 2014
Scotland decided to trust its 16-year-olds to vote in the biggest question in its history. Americans, in contrast, don't even trust theirs to help pick the county sheriff. Who's right?
updated 9:57 PM EDT, Thu September 18, 2014
Ruben Navarrette says spanking is an acceptable form of disciplining a child, as long as you follow the rules.
updated 11:47 AM EDT, Fri September 19, 2014
Frida Ghitis says the foiled Australian plot shows ISIS is working diligently to taunt the U.S. and its allies.
updated 3:58 PM EDT, Fri September 19, 2014
Young U.S. voters by and large just do not see the midterm elections offering legitimate choices because, in their eyes, Congress has proven to be largely ineffectual, and worse uncaring, argues John Della Volpe
updated 9:58 PM EDT, Thu September 18, 2014
Steven Holmes says spanking, a practice that is ingrained in our culture, accomplishes nothing positive and causes harm.
updated 2:31 PM EDT, Thu September 18, 2014
Sally Kohn says America tried "Cowboy Adventurism" as a foreign policy strategy; it failed. So why try it again?
updated 10:27 AM EDT, Thu September 18, 2014
Van Jones says the video of John Crawford III, who was shot by a police officer in Walmart, should be released.
updated 10:48 AM EDT, Thu September 18, 2014
NASA will need to embrace new entrants and promote a lot more competition in future, argues Newt Gingrich.
updated 7:15 PM EDT, Tue September 16, 2014
If U.S. wants to see real change in Iraq and Syria, it will have to empower moderate forces, says Fouad Siniora.
updated 8:34 PM EDT, Wed September 17, 2014
Mark O'Mara says there are basic rules to follow when interacting with law enforcement: respect their authority.
updated 9:05 AM EDT, Tue September 16, 2014
LZ Granderson says Congress has rebuked the NFL on domestic violence issue, but why not a federal judge?
updated 7:49 AM EDT, Tue September 16, 2014
Mel Robbins says the only person you can legally hit in the United States is a child. That's wrong.
updated 1:23 PM EDT, Mon September 15, 2014
Eric Liu says seeing many friends fight so hard for same-sex marriage rights made him appreciate marriage.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT