Will There Be a Jobless Recovery? Maybe Not, but the Economy is Still in Terrible Shape.

As the economy stabilizes, or appears to, with the prospect of a rebound on the horizon, if still a long way off, a major concern is that any genuine recovery will be largely a jobless one, with unemployment remaining high even as other economic indicators show improvement. This may not be the case, however. As Jon Chait noted at The Plank, citing the WSJ, the job losses have been largely service-relative, not manufacturing-related, as the service industry has “come to dominate U.S. employment.” Whereas manufacturing can be outsourced, or replaced with ever newer technology — this I add to the WSJ’s analysis — “service” requires people to do the jobs. Some jobs will be, and have been, outsourced, to be sure, but, as the WSJ puts it, “[m]any service-related firms may have a more pressing need than manufacturers to rehire workers as demand comes back.” Let’s hope so.

On a related note, Nate Silver argued that unemployment likely won’t hit 10 percent. Again, let’s hope so.

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Still, let’s be honest about the state of the economy. Eventual jobless recovery or not, the economy is still deep in the toilet, as Paul Krugman pointed out in the NYT the other day:

Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you take into account the need to find employment for a growing working-age population, we’re probably around nine million jobs short of where we should be.

And the job market still hasn’t turned around — that slight dip in the measured unemployment rate last month was probably a statistical fluke. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.

For all that, however, the latest flurry of economic reports suggests that the economy has backed up several paces from the edge of the abyss.

And so there perhaps won’t be a Second Great Depression, with the economy now a little bit further away from “the abyss” than it was.

But what has pulled the economy, and the country, back from the edge of the abyss? What has slowed down the collapse, with improvement now at least a possibility, perhaps even a probability, in the not-too-distant future?

Krugman is right: “Big Government,” which, once again, seems to be rescuing capitalism from itself, allowing it to remain in place not just for another day but indefinitely.

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Let me be clear: I agree with Krugman not as an enthusiastic proponent of “Big Government” — I am a liberal, after all, not a collectivist, and so I prefer to have government operate within the context of a society based on individual liberty and freedom of choice — but as one who recognizes that government must play a key role in securing and maintaining the stability of the free market, as well as in doing what the market cannot or should not do for itself. (This includes ensuring that there is universal access to adequate and affordable health care, as well providing national security and an effective military establishment.)

To me, liberalism is, in public policy terms, primarily about extending freedom to as many people as possible. It is not, like libertarianism (the neo-liberalism of the right), about sanctioning the inequality and inequities of the status quo. And so liberalism, as required, must also be about ensuring that the market operates fairly, allowing as many people as possible to participate in it, and benefit from it. And this, as the current economic crisis shows, requires government intervention, in terms of both regulation and stimulation.

Obviously, there is still much to do. The economy hasn’t yet recovered. But it has improved, at least relative to its recent slide, and, for that, there is government, the “Big” government so loathed on the right, to thank.

(Cross-posted from The Reaction.)