DURING the last week, the nation has witnessed much partisan wrangling over the economy. So it might be worth stepping back and assessing what we know and what we donâ??t. Letâ??s start with five propositions about which there is little doubt:
â?¢ The economy is in bad shape. Technically, the recession ended in June 2009, and since then the economy has been recovering. But it doesnâ??t feel that way to many Americans. Things have stopped getting worse, but they have not gotten much better. The recovery has been so meager that unemployment lingers at historically high levels.
â?¢ The disappointing news about job creation is closely linked to lackluster growth in G.D.P. Economists call the relationship between growth and unemployment â??Okunâ??s Law,â? after Arthur Okun, who studied it in the 1960s. In essence, Okunâ??s Law says that to reduce the unemployment rate, we need for gross domestic product to grow by more than its long-run average rate of about 3 percent. So far in 2011, the growth rate has been less than 1 percent.
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