By now you’ve probably heard that the job market tanked last month. The number of jobs out-and-out declined for the first time in almost five years. But the unemployment rate is still really quite low. What’s going on?

Today’s report from the Bureau of Labor Statistics showed the unemployment rate falling from 5.0% to 4.9%, though it was essentially unchanged (to 4.93% from 4.98%). The real question is how can folks like me argue that a recession is imminent or perhaps even underway with unemployment this low?

Let me count the ways.

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The Hazard of Moral Hazard

Announcing EconoCorner

First, there’s been a great deal of hand-wringing regarding the dangers of current efforts to stimulate our ailing economy, which grew a scant 0.6%—spitting distance of zero—in the fourth quarter of last year. The worry is that by applying all this monetary and fiscal stimulus, we are simply recreating the very conditions that got us here in the first place. By easing the terms of credit, coming to aid of mortgage defaulters, and air-dropping tax rebates, we’re reflating the bubble and ignoring moral hazard (the theory that folks will under-price risk if their bets are covered). I get the point, and it’s a good one, but I disagree.

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