Inching toward recovery: the nation's economy is gaining strength, and even employment should start picking up this year.

• Author: Thornberg, Christopher
• Position: ECONOMY

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Many pundits say the United States has yet to pull out of the recession that began in December 2007, and they point to ongoing high unemployment as first-hand evidence.

It's true U.S. employment numbers are grim. The slow pace of job creation resembles the jobless recoveries following the 2001 and 1990 recessions. The job losses in this past recession were much larger as a share of the labor force than those that occurred in the two earlier downturns. The net result is that unemployment in still uncomfortably high at 8.6 percent as of November.

In addition, many workers have simply dropped out of the labor force and are not even counted among the unemployed. Millions have been out of work for more than a year, and with each passing day it grows more difficult for these people to find a new job with pay comparable to what they lost.

Those who say the economy is still in a recession and that a lack of jobs is the problem, however, are confusing cause and effect. First, the U.S. economy is not in a recession. A recession is largely characterized by a decline in aggregate output--in other words, when you are producing fewer goods and services this year as compared to last year. The last quarter of negative growth in the United States was in the second quarter of 2009. Since then, the nation has had nine straight quarters of positive growth, and all indications were that the fourth quarter of 2011 would be positive as well.

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Not all the news is grim. Since reaching its lowest point in 2010, total nonfarm employment in the United States as of October had risen by 1.6 percent, or by 2 million jobs. Also, from its peak in 2009 of 10.1 percent, the national unemployment rate had fallen to 8.6 percent in November--still well above historical norms, but an improvement nonetheless. And incomes are rising. Those who have jobs earned more last year than they did in 2010. The number of job openings also continues to rise. Job openings in the United States have been above 3 million for the last three months of data, the best reading since before the recession began, according to the Bureau of Labor Statistics.

That's the good news. Now for some bad news. Many families continue to struggle, and 14 million people who want to work can't find jobs.

So what is wrong with the labor markets? There are really two main problems. The first is the output gap and the nature of the economic recovery itself. The second is...