I've noted before that we came into this recession in far better shape than the last severe downturn, that of 1981-82. Many Western governments, conspicuously Canada, had their fiscal houses in order this time. The corporate sector was carrying far more debt in 1981-82, due to a takeover binge perilously financed with floating-rate (very short term) borrowing, and burdened with unsustainably large payrolls.
So we had arguably the first "white-collar recession" of modern times, with office workers even more likely to get pink slips than factory workers. Both inflation and interest rates were in double digits. The former was due to the oil shocks of 1973 and 1979. The latter was crude instrument used by then-Fed chairman Paul Volcker in his successful quest to finally slay the inflation dragon.
Chart courtesy American Enterprise Institute.
What followed that "cleansing," beginning in August 1982, was the biggest bull market in history, for stocks and the general economy. A comforting bit of history, that. Except this time it's hard to see where the job recovery comes from. The 1980s were the decade of an explosion of growth in Silicon Valley, unlikely to be repeated. Toward the end of that decade, every hospital, museum and auto-body repair shop had installed PCs. Apart from the computer infrastructure now being in place, much of the manufacturing work has long since been outsourced to Asia.
It's tough to see jobs coming back in N.A. manufacturing for the same reason. Only the public sector has an obvious need for jobs, in rebuilding transportation infrastructure and energy retrofitting of buildings, and caring for a Baby Boom generation heading into its high-maintenance healthcare phase. But governments at every level are running huge deficits, a brake on even greater economic "pump priming" than their stimulus spending is already doing.
What all that points to is a prolonged "jobless recovery." Hope I'm wrong.