• Is the economy in the midst of a recovery? The growing body of data, including the new GDP report, show that the economy is in a moderate-paced recovery. Since the last quarter of contraction (2009 Q2), real GDP has expanded 2.7%. To put things into perspective, three quarters following the last quarter of contraction in the 1990-91 recession, real GDP expanded 1.5%. In the 2001 recession, that figure was 1.8%. A moderate-paced recovery is underway. No one here is arguing that an economic boom is underway. Moreover, I expect the long-term growth to amount to less than what occurred during the 1980s and 1990s due to the nation's debt overhang/competitiveness issues in certain economic sectors/structural damage caused by the housing bubble, etc. But again, that does not require one to ignore the reality that the economy has resumed expansion. The data show that it has.
• Is the labor market growing? Most data indicate that the labor market has stabilized. There is some data suggesting that the labor market may be in the early stages of a resumption of growth. By this summer, I expect that it will be clear that the labor market is again expanding. That does not mean that the economy will be anywhere close to full employment anytime soon. Given the sizable structural component to the unemployment problem, a full employment situation is not likely anytime soon.
• Are there major fiscal imbalances? There are. Those imbalances could undermine growth in the medium- and longer-term. They do not mean that the economy is not in a recovery right now.
As I've commented frequently on the need for a credible fiscal consolidation effort (discretionary spending cuts; mandatory spending reform/fundamental health reform to deal with the excess cost growth issue; tax hikes) beginning as early as 2011, my recognition of the existence of such fiscal imbalances and their associated medium- and long-term economic, political, and social risks is clear.
But that's an entirely different issue from the above two matters. Recognition of the gravity of the fiscal challenges does not require one to deny the moderate growth that is now underway nor preclude the possibility of labor market expansion that could occur in coming months as the cyclical recovery advances (as is likely despite the presence of headwinds in some sectors).
In the end, I can understand that the resumption of economic growth and later, job growth, is inconvenient for the political leaders who forecast 'endless recession' or worse in opposing various public policy decisions/changes. That economic recovery and job growth will undermine their credibility in the face of their gloomy predictions and will likely begin to impact electoral outcomes as the recovery advances and unemployment rate begins to fall is completely their problem. That such dire forecasts and exaggeration closely echo those made in 1982-83 following a severe recession and contentious policy environment is not at all surprising in the context of human behavior.