Yes, We Should Still Prepare for Recession at Any Moment

Also, apparently we’re at full employment now?

Photo credit: Alexas_Fotos, CC0 Public Domain.

Add one more article to the “our current economic bubble is going to burst” list:

Every boom in the U.S. economy is different, but over the past several decades, each has ended the same way. First you get full employment. Then you get a spike in the price of oil. And then there’s a recession.

My first thought was “wait, we’re at full employment?” The next two articles in my “write about this for The Billfold” queue are literally about groups of people who can’t find work, or who can find work but it’s unstable gig-economy stuff.

But Bloomberg cites a Marketplace story from 2015, claiming we’re at full employment, maybe:

The unemployment rate fell 0.2 percent to 5.1 percent in August according to the Labor Department. Unemployment is down from a peak of 10 percent in October 2009, and 6.1 percent in August 2014.
The Federal Reserve considers a base unemployment rate (the U-3 rate) of 5.0 to 5.2 percent as “full employment” in the economy.

Okay. So “full employment” doesn’t mean there’s a job for everyone who wants one. As Marketplace explains, full employment means there’s more of an equal balance between job openings and job seekers. (The article also notes that employers aren’t necessarily raising salaries to attract those job seekers, because they don’t need to.)

But back to our theoretical forthcoming recession. What does Bloomberg’s Conor Sen think will happen?

The unemployment rate has gotten to 5 percent or lower four times since the early 1970s, and each time the economy followed this pattern with an oil spike and a recession.

Ah. Sen also notes that this pattern is related to “three of the last four elected Republican presidents:” Richard Nixon, George Bush, and George W. Bush. (He doesn’t explain why Reagan’s administration didn’t follow that pattern, and I’m not old enough to remember what was going on during the Reagan years. If anyone has any insight, please share.)

Right now we have a Republican president and full employment—which means that we should probably keep an eye on oil prices. After that… well, I don’t know if it’s better for the bubble to burst right away or for us to keep blowing it higher and higher for as long as we can.