The Bad Job Numbers and the Secret Second Stimulus

Friday 08 January 2010

The Bad Job Numbers and the Secret Second Stimulus
Lone businessman walks through an empty parking structure. (Photo: ramenlover)

The Labor Department reports that 85,000 jobs were lost in December. The official rate of unemployment (which measures how many people are looking for jobs) held steady at 10 percent nonetheless. That’s because so many more people have stopped looking. Reportedly, 661,000 Americans dropped out of the labor force last month, deciding there was no hope of finding a job. Had they continued to look, the official unemployment rate would have been 10.4 percent.

These statistics mask an even more troubling reality. Since the start of the recession in December 2007, around 8 million jobs have been lost. But this doesn’t include all the people who, in a growing national population, would have entered the labor market had there been jobs for them. These “never entereds” amount to an estimated 2.5 million. So, in truth, the national economy is down by 10.6 million jobs overall. There’s no way to make this up for years.

The most painful political truth for Democrats is the nation won’t possibly be out of this jobs hole by the presidential election of 2012, even if the recovery is vigorous. Do the math. In order to get out of the hole, we’d need an average monthly increase of 400,000 jobs between now and then. But even at the peak of the 1990s jobs boom, the highest we ever got was 280,000 jobs a month. At the peak of the last recovery, in 2005, we got no higher than 212,000 jobs a month. Bottom line: Obama will be going into an election year with a higher total level of unemployment than before the Great Recession. He will have to argue that, were it not for his policies, things would be even worse. Counter-factuals like this do not sit well on bumper stickers.

Almost 40 percent of the jobless have been without work for over six months. That’s a record. People who have been out of the labor force for more than six months have a particularly hard time getting back in. Many never do.

What worries me most about all this is the trend line. If we were coming out of a recession with any potential strength in the job market, we’d at least see growth in the length of the average workweek. But there’s no sign of any growth. The average workweek held steady in December at 33.2 hours. Employers aren’t even giving their own workers more hours.

Big American companies are more profitable, to be sure. But there’s a massive disconnect between profitability and employment. Companies are increasing profits by cutting their costs (including payrolls), outsourcing more jobs abroad, and selling more abroad. But American workers — and, therefore, American consumers — are still stuck in a deep recession.

Only two things are keeping unemployment from rising more: The stimulus package, which is approaching its peak spending; and the Fed, which continues to keep a loose rein on the money supply and buy up mortgage-backed securities. After December’s discouraging job’s report, don’t expect the Fed to tighten any time soon — probably not until after the middle of 2010, at the earliest.

What about fiscal policy? A second stimulus? Yes, to this extent: Democrats are looking into the cross-hairs of a mid-term election that won’t be pretty, to say the least. Pelosi has to hold on to 40 seats. In the Senate, Dodd’s and Dorgan’s departures pose a huge problem. Without 60 reliable votes, the Senate Dems won’t be able to do much of anything. Rarely in history have the Republicans in both chambers been so relentlessly united. The dismal jobs picture makes Republicans salivate over 2010 and 2012. Dems know they have to do something to show voters they’re focused on jobs. A victory on health care won’t cut it.

So expect the Dems to move toward more spending — more unemployment benefits, more cash for clunkers, more help for small businesses, maybe a new jobs tax credit. A larger defense budget will also be part of the stimulus. But don’t expect any of this to be dressed up as a “second stimulus package.” That would give Republicans too much ammunition to attack Dems as big spenders and try to focus the public’s attention on the widening deficit and growing federal debt.

The truth, of course, is that the most important fiscal indicator is the ratio of the debt to the GDP. And the most important issue there is how quickly America can get jobs back and the GDP growing again. More spending in the short term is the only way to accelerate a jobs recovery, and reduce the debt-GDP ratio over the longer term. In other words, more deficit spending is a good thing to do now, a but a bad thing three or four or five years from now when the economy is back to normal. (I should admit at this point that I don’t think we’ll ever get back to “normal” because I believe “normal” got us into the pickle we’re now in, but I’ll save this for another time.) Yet Republicans will demagogue the deficit and debt like mad in coming months.

I hope the President doesn’t take the bait and begin talking about deficits and debts, when he should be talking only about creating more jobs. How issues are framed for the public makes all the difference.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Comments

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FINALLY AT LASTSOMEONE

Sun, 01/10/2010 - 12:35 — Woodchipp (not verified)

FINALLY ***AT LAST***SOMEONE SPEAKS THE ECONOMIC TRUTH. A friend of mine who is an investor has been complaining for at least three years that there are TWO American economies: the corporate economy and the rest of ours. The government counts corporate investment and profits OVERSEAS as part of the "national" GNP. This wonderful accounting trick -- blathered incesantly by our lying media -- even greater marvels such as a "jobless recovery" and "enhanced collective stupidity" It is probably too late, but if Americans want to have a country they are going to have to nationalize the banks and repatriate production.

In an age of ecological

Sun, 01/10/2010 - 12:42 — greg gerritt (not verified)

In an age of ecological collapse to expect GDP to grow is unrealistic. What we should be doing is creating jobs while looking at how to equitably shrink the economy. The key area for jobs creation is going to be local agriculture. Growing the food we can no longer afford to ship from places like California due to its carbon footprint, and that will no longer be grown in places like the desert of California's Central Valley due to loss of irrigation water due to climate change.

The only way to get full

Sun, 01/10/2010 - 13:01 — drosera (not verified)

The only way to get full employment in this country is to shorten the work week to 30 hours while taxing the hell out of big incomes. There should be a national bank to provide loans to entrepreneurs who will restore the manufacturing sector to the United States. Tariffs will be applied to all manufactured goods produced under sweat-shop conditions and without regard to environmental regulations. The money supply will be anchored to resources of enduring value or to an international currency which is established to avoid fluctuations in national currencies. And, yes, we will live at a lower standard of living, but the things necessary for life--food, shelter, medical care, and a job--will be taken care of.

This is the only argument in

Sun, 01/10/2010 - 13:26 — An (not verified)

This is the only argument in favor or our endless mindless national-debt growing wars. At least the military-industrial complex keeps people employed, or takes them off the rolls permanently by killing them. Cynical? How else can I feel? When we don't fine outsourcing of jobs, what motivation is there to employ locally? When the rich run the country, why would you expect higher taxes on the rich?

Remember how the politicians

Sun, 01/10/2010 - 13:30 — Anonymous (not verified)

Remember how the politicians have been talking about sharing the pain for the last two years or so? Well, it's time for the wealthy to start sharing that pain.

If a Wall Street executive gets a $100 million bonus, take $80 million. And to those who say, he earned it and how will HE create new jobs now? I say, first, he never did anything of value to earn it, and second, those people do nothing to create jobs because they put their money into the same corporations who are making money by sending jobs overseas.

The jobs are gone and they

Sun, 01/10/2010 - 14:29 — EDGEOFNOWHERE (not verified)

The jobs are gone and they are not coming back in any sense as we knew it. The heady days of the debt based consumer economy are gone forever. Real unemployment is closer to 16% minimum and it is going to get worse, a lot worse. Unlike the European Union, we are embroiled in senseless wars around the world, and have just given the elites and banksters over one trillion dollars, so we have no funds to assist the unemployed and homeless. In fact, we are cutting what meager benefits they still have, and of course the health care that all EU citizens enjoy is non-existent in the US. With no positive economic news on the American Empire's horizon, those citizens that can are beginning to leave the sinking ship for other countries. There is a significant increase in Americans selling out and retiring or relocating to Uruguay, Ecuador, Belize, Costa Rica just to name a few. Like savvy Germans getting out while the getting was good in the early 1930s, those who see the writing on the wall aren't waiting around for the inevitable collapse.

The only way this country is

Sun, 01/10/2010 - 14:52 — Anonymous (not verified)

The only way this country is going to recover and offer a life better then for the majority in Brazil or Dubai (for example) is for Wall Street to be attacked, militarily.

You said: "Dems know they

Sun, 01/10/2010 - 15:20 — Philip (not verified)

You said: "Dems know they have to do something to show voters they’re focused on jobs. A victory on health care won’t cut it." That is where you are WRONG and are making a big mistake. As you said, the employment picture will not be good in November, no matter what, not enough time under any circumstances. BUT.... Passing a REAL Health Care reform Bill would do it. (or at least a strategy for passing if they are successful in gaining real power over righties in the 2010 midterms) IF, Obama would put Single Payer on the table for after the midterms, they would EASILY be voted in by a landslide. Can the Dems grow some?

Sad to say, the Democrats

Sun, 01/10/2010 - 16:45 — Curt (not verified)

Sad to say, the Democrats had their chance to prove they were more focused on the needs of the average American, and they squandered it. Rather than knuckle down and fight for what was right for the people they embraced the lobbyists, stuffed their campaign coffers with corporate money, and sat mute to the mindless fear-mongering and obstructionism of the right, playing the "if you can't beat 'em join 'em" game. We're headed to the Grapes of Wrath, where Americans will be fighting each other for the 25 cent an hour jobs, picking peaches they won't be able to afford to buy, and just like the times that the story was set in, it's no accident. Obama had the bully pulpit that he could have used to go in the other direction, but he's kept his campaign coffer filled and stayed quiet. As someone above said, the smart folks are abandoning ship, because they know we're sunk. It's just a matter of time.

Republicans have no better

Sun, 01/10/2010 - 17:22 — MG (not verified)

Republicans have no better ideas than Democrats when it comes to the needs of average Americans. In fact, the previous 8 years are proof positive of that. The Bush administration, with much help from right-of-center Clinton, created the mess we're in, and voters should remember that in 2010 and 2012. For the Congress to bounce back to a Republican majority in 2010 will signal to me that Americans really ARE clueless, if not stupid, and locked in an insane loop seeking immediate gratification. People, we need to shake this insanity loose, and take a hard look at third party candidates in 2010/2012. The two wings of the existing corporate party will not solve this crisis.

Voting for a democrat is no

Sun, 01/10/2010 - 18:14 — Anonymous (not verified)

Voting for a democrat is no better than voting for a republican. From now forward I won't vote for any Republocrat.

MG has the right of it.

Sun, 01/10/2010 - 18:28 — bob o (not verified)

MG has the right of it. Unfortunately, my belief is that the American people are sheep and will blindly follow where they are led by our 2 political party's and their lies and deceits.

I also agree with MG about

Mon, 01/11/2010 - 08:43 — Anonymous (not verified)

I also agree with MG about the insane loop.
Here we are - in the 21st century - blowing ourselves and our planet to smithereens, and if you live in the USA your money and your youth are funding these wars and the others to come. Is the fear-mongering working on you, limiting your scope?

People with good minds, a world of ideas and wealth of abilities, and a real willingness to build a new world are out there, everywhere. Let us start on a new road together by agreeing to join forces against the two parties that no longer work for us.

Be scared stiff - or agree to work together for our future, in spite of our fears.

I currently reside in Spain

Mon, 01/11/2010 - 11:39 — pink elephant (not verified)

I currently reside in Spain where I have come to develop a begrudging respect fot General Franco, the man who once said,"You can shoot the workers, but you can never fire them." I like that, where is Franco, when we need himAnd where is Jose Antonio?

Third Party Time! Indeed,

Mon, 01/11/2010 - 11:55 — Bill O'Rights (not verified)

Third Party Time! Indeed, the Left/Right paradigm is, by degrees, being revealed for the fraud that it is - the dismantling of freedom and the bill of rights - with the Left dismantling Property Rights, State's Rights and the Right to Bear arms, while the Right dismantles Freedom of Speech and champions that Corporations have the Rights of Citizens, while supporting all military adventures all the time. The Bill of Rights is a beautiful and as-perfect-as-possible clarifier of the Constitution. We have not lived under it for a good while now, and at root has been the granting of the privilege of creating our currency and controlling the credit thereof - in direct violation of the Constitution, and have suffered the consequences as warned by Thomas Jefferson. It is time to End the Federal Reserve Bank - the private corporation which has served the handful of profiteers who now dominate the world - it is time to TAKE IT BACK. We have a one party system - the party supporting the Federal Reserve Bank - it doesn't matter whether we overspend on war or social programs - just that we overspend, and are forced to borrow from that private FRB - who doesn't even have to show us their books! This rat is so big that we live in it's shadow and fight amongst ourselves while the rat feeds upon us.

Dr. Reich's assurance

Mon, 01/11/2010 - 14:01 — Dave at collinda (not verified)

Dr. Reich's assurance regarding the debt to GDP ratio is only partially reassuring. As he correctly notes, "off-shoe sourcing" has taken a huge bite out of US jobs and will likely continue to do so. The rationale behind the debt to GDP ration is founded, at least to some extent, on an assumption of a direct link between GDP and domestic employment. While the "product" in GDP is domestic by virtue of where the corporations are located (though many are actually chartered in tax-friendly countries) many of those responsible for producing are most certainly not domestic. It may be time to re-evaluate that debt ratio.

People aren't going to sit

Mon, 01/11/2010 - 19:59 — Anonymous (not verified)

People aren't going to sit still forever. The system of capitalism was never supposed to last forever. It appears as though we are entering a crisis (a fundamental element of capitalism that is bound to happen from time to time under capitalism's existence) so extreme that the people will wake up one by one as the jobs are lost, pay is cut, cost of living goes up, a government obviously a machine for the bourgeoisie, and the Fed Res sucking the lifeblood of our society which is our money. All these things happening at the same time, along with wars we can't afford, and a constant feeding of mindless half-truths and flat out lies which cover up the painful truth have the masses filled with nonsense. But at some point you've got to say it gets so bad that an end must come to it. More people wake up, the local communities will have to operate within themselves to survive. But can this be done peacefully (imho no, it will be painful with a lot of death, starving, suffering)? Looks like a lot of bloodshed is on the horizon before the wise ones are able to create a sustainable world that will finally know widespread truth, peace, and fairness without kings (elites, bankers, politicians) running the show as the proletariat's masters. Try to keep a little grace, you create your reality, its not all bad if you create a reality that is good.