A rather stunning opinion column has been hitting the blogs late tonight; it’s an op-ed from Nobel Prize-winner and Columbia University economics professor Joseph Stiglitz in tomorrow’s Financial Times, entitled: “The US labour market is still a shambles.”
To get a sense of reality (at least from Stiglitz’ viewpoint) about the level of over-the-top spin on our economy that’s pervasive throughout our society right now--and I happen to agree with that assessment of the spin, at this point—I strongly urge you to read his entire piece.
In it, he doesn’t just cover our nation’s jobless fiasco; he provides a solid overview of the current state of our entire economy. It flies in the face of much of the spin, “proofiness” and “disestimation” that is commonplace throughout both major political parties' propaganda, the MSM, and even with some in this community.
Frankly, and from a purely and politically pragmatic standpoint, talk of the U.S. economic “recovery” is all but meaningless to almost half of our country’s population: the 40%-45% and/or 140,000,000-plus Americans living in, near, or just a couple of paychecks away from poverty. To many (voters) just struggling to survive it’s, dare I say it, even disaffecting.
Stiglitz provides us with a very concise economic synopsis for this election cycle; and it’s a wake-up call as to why Democrats should be laser-focused upon our number one opponent in the Fall. (Hint: It’s not the pitiful excuse that we refer to as the opposition party.)
(h/t to University of Oregon economics professor Mark Thoma, who strongly agrees with Stiglitz’ assessment this evening.)
The US labour market is still a shamblesHe discusses a return to “’normal’ growth rates,” once the public has concluded deleveraging; but, by definition, this requires increased consumer demand. And as Stiglitz sees it, that’s not happening anytime in the near future. In fact, Stiglitz flat-out states that we shouldn’t “expect the ‘return’…of American consumers – indeed, we should worry at their reappearance, for what it says about both their rationality and a financial system that facilitates such profligacy.”
By Joseph Stiglitz
March 12, 2012 7:21 pm
It is understandable, given the number of times green shoots have been seen since the downturn began in December 2007, that there might be some scepticism about claims the recovery is finally under way. To me the question is what does it imply for policy? Does it mean we can be more relaxed about the demands for budget cuts emanating from fiscal conservatives? Or that the US Federal Reserve should start paying more attention to inflation, and begin contemplating raising interest rates? Even if this is not one of the many green shoots that soon turn brown, the economy will almost certainly need more stimulus if it is to return to full employment any time soon.
This is the inevitable conclusion from looking at the state of the labour market today. It is a shambles. In Friday’s US employment report, the proportion of working-age American adults in a job moved up only 0.1 percentage points, to a miserable 58.6 per cent – numbers not seen since the downturn of the early 1980s. There are still 23m Americans who would like a full-time job but who cannot get one. The jobs deficit, the number of extra jobs that would have been required to keep up with new entrants to the labour market, is 15m. Employment has yet to return to its level of December 2008. Male employment is still below what it was in February 2007 – meanwhile, the working-age population has grown considerably.
Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.
With labour-force growth normally about 1 per cent per year and productivity growth about 2-3 per cent, it takes sustained output growth in excess of 4 per cent to bring unemployment down. No one expects growth at that pace for long enough to return the US economy to full employment any time soon…
He reminds us of the blatant propaganda inherent in ANY discussion of consumers' savings’ rates, since it’s “…the top 20 per cent of Americans saving 15 per cent of their income and the bottom 80 per cent spending an abnormal 110 per cent of their income.”
He talks of ongoing weakness in the property/housing sector. Another topic that I’ve spent a lot of time covering, both recently and for many years. And, he points to “constrained” state and local governments, hampered by draconian budget cuts and falling tax revenues as a result of the mortgage/housing mess.
Towards the end of his piece, Stiglitz focuses upon worsening U.S. income inequality and the notion of full employment in our “new normal.” He continues upon a theme he’s been discussing for many months (actually, throughout his career), and it regards the “natural rate of unemployment.”
He also discussed this in a post over at Project Syndicate, in mid-January, entitled: “The Perils of 2012.” In it, he noted, that it isn’t out of the realm of possibility that our country “will solve its political problems and finally adopt the stimulus measures that it needs to bring down unemployment to 6% or 7% (the pre-crisis level of 4% or 5% is too much to hope for). But this is as unlikely as it is that Europe will figure out that austerity alone will not solve its problems.”
So, on February 8th and 9th, while the White House was busy putting the finishing touches on their revised spin about much “rosier” employment projections between now and Election Day, Ben Bernanke was making MUCH more cautious public pronouncements about unemployment expectations.
Our nation’s devastating, long-term unemployment nightmare--a subject that many in the Democratic blogosphere have also attempted to outspin of late by focusing upon the first couple of truly decent U.S. Bureau of Labor Statistics’ monthly unemployment/employment reports in almost four years—has escalated to the point where Federal Reserve Board Chair Ben Bernanke has just highlighted this even greater, inconvenient fact about our nation’s record-breaking, long-term jobless reality for millions of us, which, reiterating, has now surpassed levels we experienced during the Great Depression. But, as Bernanke is now acknowledging it publicly, there’s something else, perhaps even worse, going on here: “With many more people no longer considered part of the workforce, Bernanke said that January's 8.3 percent unemployment rate ‘no doubt understates the weakness of the labor market in a broader sense.’”
Bernanke continued on to warn us of a “…modest increase in the sustainable long-run rate of unemployment.” What he’s talking about is a rise in what used to be referred to as the ”natural rate of unemployment”…“for the foreseeable future,” from 4% to 6%. As in: permanently. (Actually, this mainstream economic thinking has now evolved into what economists call the "NAIRU," which is the acronym for the "Non-Accelerating Inflation Rate of Unemployment." Per Wikipedia: this "refers to a level of unemployment below which inflation rises." To read more about Bernanke’s commentary, see this Bloomberg story: “Bernanke Says 8.3% Unemployment Understates Weakness in U.S. Labor Market.”)
So, we now have Bernanke and Stiglitz discussing best-case scenarios about a “new normal” where somewhere around 6% or 7% will be the “natural rate of unemployment” for the foreseeable future. How do you think this bigger truth, about our nation’s OTHER long-term unemployment nightmare, is going to play on Main Streets across America in coming months once the 99% read about this reality, confirming what they’re already witnessing in their day-to-day lives as you read this?
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Some really good follow-up reading, IMHO, on much that is covered, above…
In “The Precarious Jobs Recovery,” Clinton Administration Labor Secretary Robert Reich posted a very incisive analysis of the Bureau of Labor Statistics’ (BLS) February 2012 Employment Situation Report (and the current state of our economy, in general), just hours after it was made public this past Friday morning.
Chrystia Freeland, the former US editor of the Financial Times, and now the editor of Thomson Reuters Digital is quickly becoming one of my new favorites for economic commentary, in general. Checkout her Thursday piece on income inequality, “The 1 percent recovery.”
For some excellent charts on all of this, I’d suggest you take a few minutes and see Robert Oak’s latest at his Economic Populist blog, from Friday, “The Bloom Comes Off the Unemployment Report Rose.”
From the Wall Street Journal blog, on Friday: “Jobs Data Improve, but Growth Picture Darkens.”
And, speaking of growth, from earlier on Friday, also via Mark Thoma’s Economist's View blog, a piece by fellow economist Lane Kenworthy: “The Great Decoupling of Income Growth for Middle-Class Households.” It’s all about “…the disconnect between economic growth and the growth of median or other measures of middle-class household income.” And while some claim it “…can be explained away by measurement errors…Lane Kenworthy says no matter how you measure it, ‘Decoupling is real and sizable.’”
Re: All of those “housing-has-bottomed” memes you’re now reading about (which conveniently don’t even reference, let alone discuss or acknowledge, an unreported massive “shadow inventory” in U.S. housing that’s not covered in the common metrics used nowadays in the MSM, or even in the blogosphere), HERE’s the latest from Michael Olenick, a favorite of Yves Smith over at Naked Capitalism: “Beware of Housing Market Cheerleading.”