Told you so

The job figures out of Washington today were a mixed but mostly very sad story.  There were upward revisions in the January and February hiring numbers, and construction employment remained strong (houses being built on unfounded optimism of a major housing turnaround).  But job creation in March was lousy — the worst in almost a year, and just half of what was expected to sustain our so-called anemic “recovery.”  Remember, with Europe contracting and China slowing down, US growth is supposed to lead the world out of recession — but it ain’t happening.

Most distressing was the continued withdrawal of workers from the US labor market, with half a million (!!?!!!) workers quitting the labor force.   That is more than five times as many workers leaving the labor force as found jobs last month, according to the household survey.  And this is supposed to be a recovery?  7.6 million workers remain in part-time work despite expressing a desire for full-time employment.

Canada too is sinking, having lost 54,000 jobs in March, with unemployment ticking up for the first time in months.  And unemployment in Europe hit a new all-time high at 12% for the Eurozone as a whole.

It is time to recognize that in terms of labor markets, there IS NO RECOVERY.  The U.S. economy is expanding only because people are again tapping their savings (US savings rates dropped early this year to their lowest level since the recession began), and because  corporations can conjure growth out of thin air by borrowing money from the Fed at zero or negative interest rates and investing in bonds, real estate and other speculative assets. But there is no real growth in consumption or output — people are treading water and paying to do so.

As Christine Owens wrote in the NY Times today: “This seems to be a long-term sleeper crisis too, as we think about long-term unemployed workers who are in midlife and older workers who are likely dipping into retirement savings in order to stay afloat,” said Christine L. Owens, executive director of the National Employment Law Project. “We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”

It is remarkable that policy-makers remain as addicted to self-inflicted pain as any medieval mystic (of course the pain they are inflicting is on their citizens, not themselves, so maybe psychopath is a better adjective).

We have had a major banking/fiscal crisis in the U.S. and southern Europe, at the exact time that the world balance of payments is shifting due to China trying to move from export-led growth to consumption-driven growth.  The logical response is for the strong economies of northern Europe to borrow and spend to compensate for the necessary retrenchment in southern Europe, and for the US to be counter-cyclical in spending and force corporations and banks to inject liquidity into the economy.

Instead, northern European countries are preoccupied with their own rigid austerity in the name of fiscal virtue, thus making it impossible for southern European countries to recover regardless of the suffering and sacrifices they endure.  At the same time, the U.S. is taxing workers (restoring the additional 2% levy on all wages for social security taxes) while corporations and the rich enjoy their largest gains in three generations — which they are simply stashing away in overseas havens and government bonds because there is no growth in purchasing power to stimulate investment.  And all this is before we feel the effects of the sequestration which is now locked in to reduce government spending for the next decade.

And during this so-called ‘temporary’ retrenchment, an entire cohort of older folks in the US, and younger folks in Europe and America, are being flushed out of the job market for years, losing irreplaceable experience and training.  Indeed, in the US many young folks are staying in school and taking out huge loans which they may never repay in the hope that they will someday have a better job.  We are thus building up long-term deficits in skills, and long-term debt burdens, that will weigh down our economies for years to come.  Yet no action is being taken to prevent older workers from opting for disability as the ‘new welfare;’ or to fund education and training for young people — quite the reverse, as college costs are being driven up by declines in public funding, forcing more people to enroll in for-profit schools and pay higher private tuition if they seek post-secondary training.

All this means that the lives of ordinary workers are being sacrificed on the altar of austerity.  This is going to be a looooong recession; indeed given that most economies of the world are still sinking, not recovering, it is only a matter of time before we rechristen this a depression.


About jackgoldstone

Hazel Professor of Public Policy at George Mason University
This entry was posted in The Global Economy, U.S. Politics and tagged , , , . Bookmark the permalink.

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