Is the US Jobs Crisis Here to Stay?
Talton of the Seatle Times reports, Why
the US is in a jobs crisis:
The situation is nicely encapsulated by economist Nouriel Roubini’s tweet
this morning: “US economy now close to stall speed. From anemic recovery to
tipping point to stall speed and growth recession. Is a double dip next?”
The economy only
created 54,000 jobs last month. It takes
between 125,000 to 150,000 net new jobs a month just to keep up with the organic
numbers of people entering the labor force, much less make up for the losses of
the Great Recession.
Unemployment “officially” stands at 9.1 percent, the real rate much higher.
“To remind us what a healthy unemployment rate looks like, four years ago, in
May 2007, the unemployment rate stood at 4.4 percent, and 11 years ago, in May
2000, the unemployment rate was 4.0 percent,” according to economist Heidi
Shierholz of the Economic Policy Institute. “The U.S.
workforce needs the pace of job growth to accelerate dramatically in order to
re-establish full employment within any reasonable timeframe, and instead, the
recovery is on pause.”
Put another way, by the blog Zero
Hedge, the U.S. would have to create 250,000
jobs a month for 66 months just to return to where unemployment stood in
December 2007 by the end of President Obama’s second term. But why is job
creation broken?
It’s an area where we need urgent research and sober debate. I can think of
these reasons:
- The stimulus and the Federal
Reserve’s QE2 failed. They arguably prevented worse unemployment and
deflation, but it’s impossible to prove a negative. The stim was particularly
ill-suited for job creation — heavy on ineffective tax cuts, light on
infrastructure. Too much of the Fed’s money was used to save the Wall Street
playerz, then let them make a new killing off it.- Business models have changed. Many companies
have found ways to do as much or more with fewer workers. Thus, record corporate
profits and cash on hand haven’t translated into much hiring. Offshoring,
technology, doubling-down on the existing workforce and continuing industry
consolidation all play a role.- The negative feedback loop continues to discourage hiring: The housing
collapse (where so many jobs were created in the 2000s); millions struggling
with the consequences of losing their homes or being underwater on mortgages;
10-year wage gains worse
than during the Great Depression, lowering buying power and hurting
business; many small businesses, a key engine of jobs, unable to get loans;
government fiscal crises hurting investment and education, as well as causing
layoffs in this sector and hurting small private vendors.- The jobs-skills disconnect. Millions
of jobs for the housing bubble required relatively few advanced skills. But
manufacturers now complain they can’t find the workers who have the training to
handle the leading-edge jobs they have. This is even more pronounced in advanced
technology sectors.- The dogma about tax cuts for the wealthy
leading to job creation doesn’t work. Indeed, job creation during the
George W. Bush administration was some of the worst since the Hoover years, but
it was cloaked by the housing bubble. Meanwhile, the political climate won’t
allow for more aggressive job-creating stimulus, such as infrastructure
spending.- The capital markets have disconnected from
their traditional role of assembling funding for productive, job-creating
enterprises. Much of the big profits come from trading or job-killing
mergers. LinkedIn and Groupon are clever and will siphon off
billions of dollars in investment. They will create relatively few jobs. Even
seemingly traditional large corporations spend time making profits trading on
Wall Street rather than using the money to hire. Meanwhile, the finance sector is among the most
politically powerful and will protect the status quo.- The hollowing out of much of the economy is
real and it has happened in sectors that once created millions of jobs.
Tens of thousands of factories closed during the 2000s, and not just in the auto
industry. The textile and apparel sectors in the Carolinas were devastated by
NAFTA and China’s entry into the WTO. Again, this was cloaked by the housing
bubble.- The recovery has never been broad-based, and
businesses have been faced with ongoing uncertainty. President Obama did
himself no favors here with the complex health revamp, although it is a huge
windfall for the insurance industry. But the uncertainty also includes the price
of oil and the future of energy costs.- The sectors once called “high tech” (but almost everything involves high
tech now) are not creating large numbers of American jobs, as retired
Intel Chief Executive Andy Grove has pointed
out. As companies “scale up” they are no longer doing much hiring of
Americans.- Some will point to immigration, and in the 2000s the U.S. saw its largest
wave of immigration in its history, even larger than 1890 to 1920, and much of
it illegal. The academic evidence points to immigrants being a net plus in terms
of economic output vs. their cost in social services. But it’s also true that easy immigration helped drive
down wages. Yet this took place as American business as a whole adopted
Wal-Mart’s low-wage, part-time, minimal-benefit model. “Consumers” got
low prices, but unfortunately they also suffered as workers. Who to blame
here?For all the political theater, America has a
jobs crisis much more than a debt crisis. Until it fixes the former and
creates broad-based growth, it can’t meaningfully address the
latter.
I totally agree with many points expressed in this article, especially the
last point on America’s jobs crisis being far more important to fix than the
debt crisis. Right-wing pundits have been busy spinning the debt crisis but the
reality is unless there is a meaningful and sustained jobs recovery, the debt
crisis will never be addressed. And don’t believe anyone who tells you
otherwise.
How do I know this? Just look at Greece. Austerity is a disaster, pushing
their economy to the brink. Greece doesn’t have a manufacturing base and relies
almost exclusively on tourism and shipping as the pillars for its economy. Young
and smart Greeks are leaving the country not because they want to, but because
there are simply no opportunities in the private sector. Greek policymakers are
doing absolutely nothing to address serious structural issues in their
economy.
That brings me to my next point. The real crisis behind the jobs crisis in
the US and pretty much the rest of the developed world is the leadership crisis.
Politicians and policymakers are spewing the same old ideas. Liberals want to
increase deficit spending while conservatives want to decrease taxes and cut
spending. Same old, same old. There is nothing new in these policies based on
ideology. Nobody has the courage to take on interest groups and admit that there
is a fundamental problem with the current trajectory.
What really worries me from a social perspective is that the disconnect
between the financial system and the real economy is widening income inequality.
QE2 hasn’t done much for the real economy yet, but it’s been a boon for traders
and money managers. The financial oligarchs couldn’t care less about what’s
going on in the real economy, and neither do America’s corporate titans. All
they care about is their total compensation which continues to rise to record
levels while millions struggle with unemployment.
Unless something is done to address structural issues in the labor force,
including the ever widening income gap between the haves and have-nots, a whole
generation of workers will suffer from chronic unemployment and along with it,
loss of job skills, loss of dignity, and most worrisome, chronic mental and
physical health problems that will put additional pressure on public
spending.
Now is the time for our political leaders to step up to the plate and address
the jobs crisis. If they don’t act quickly and forcefully with fresh and
courageous ideas that work, then capitalism as we know it is doomed. If this
sounds too “Marxist” for you, then you’re ignorant of history and how human
beings always repeat the same mistakes. Somewhere down there, Marx is grinning
in his grave. I leave you with an interesting discussion from ABC’s This Week on the prospects for
the class of 2011.
