The unemployment rate, now 10.2%, is just about as high as it's ever been since the Depression (see top chart). Job losses keep mounting, and so far it's another jobless recovery. In fact, jobs haven't grown at all for about 10 years. It's painful, and it's miserable. It's terribly unfortunate that the Obama administration dumped so much "stimulus" money down a black hole earlier this year, when cuts in marginal tax rates could have unleashed the power of the private sector instead of redistributing a trillion dollars from the haves to the have-nots.
But things could be a lot worse, as the second chart shows. That's the so-called "Misery Index" that was invented in the late 1970s to capture the dual problem back then of very high unemployment and very high inflation. Today we're fortunate that inflation is still relatively low. We worry that inflation might rise in the future, but for now that remains tomorrow's problem.
Most of the changes on the margin that I see are quite positive. Despite the lack of jobs, it is still the case that the pace of job losses is slowing. We're well past the worst part of the recession and in the early stages of a recovery. Financial markets have undergone tremendous healing. The private sector has already reorganized itself to become extremely productive: the productivity of the workforce surged at an 8.1% annual pace in the six months ended September, and productivity is likely still improving. Businesses are becoming more profitable. There is plenty of cash out there. Confidence is returning. The velocity of money is picking up. Global economic activity is rebounding. It is only a matter of time before we see net job gains. It still pays to be optimistic, but one needs to be patient.