The White House must be telling itself there are still five months between now and Election Day, so the jobs picture could brighten. After all, we went through a similar mid-year slump in 2011 but came out fine.
But however you look at Friday’s jobs report, it’s a stunning reminder of how anemic the recovery has been – and how perilously close the nation is to falling into another recession.
Not only has the unemployment rate risen for the first time in almost a year, to 8.2 percent, but, more ominously, May’s payroll survey showed that employers created only 69,000 net new jobs. The Labor Department’s Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months.
Put this into perspective. Between December and February, the economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide. At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.
Face it: The jobs recovery has stalled.
What’s going on? Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they’re slowing as well. All this takes a toll on U.S. exports.
But a bigger part of the problem is right here in the United States, and it’s clearly on the demand side of the equation. Big companies are still sitting on a huge pile of cash. They won’t invest it in new jobs because American consumers aren’t buying enough to justify the risk and expense of doing so.
Yet American consumers don’t have the cash or the willingness to spend more. Not only are they worried about keeping their jobs, but their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents – an increase of 1.7 percent from this time last year – but that’s less than the rate of inflation. And the value of their home – their biggest asset by far – is still declining. The average workweek slipped to 34.4 hours in May.
Corporate profits are healthy largely because companies have found ways to keep payrolls down – substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that’s exactly the problem. In paring their payrolls, they’re paring their customers.
And we no longer have any means of making up for the shortfall in consumer demand. Federal stimulus spending is over. In fact, state and local governments continue to lay off large numbers. The government cut 13,000 jobs in May. Instead of a boost, government cuts have become a considerable drag on the rest of the economy.
Republicans will have a field day with this jobs report, taking it as a sign that Obama’s economic policies have failed and we need instead their brand of fiscal austerity combined with more tax cuts for the wealthy.
But that’s precisely the reverse of what’s needed.
This post originally appeared at Robert Reich’s Blog and is posted with permission.
4 Responses to “The Job Stall”
I would like to see some evidence that higher wages for people making say over 3 million encourages them to work harder. Common sense says just the opposite, that with that much money you would want more free time and thus work less. Thus high tax rates on the wealthy are in order.
Secondly low employment shows a breakdown of companies ability to innovate. If companies came out with exciting new products then people would spend more to aquire these. But I am sorry I just don't see those must have products. The rich are essentially bored because they have money to spend but nothing to buy, and that goes for the not so rich amongst us. Can anyone tell me something that is so cool or useful it will change peoples perception of how much they should save? In the case of the Ipad i am litterally not buying it. In some sense the globtal slowdown reflects global boredom.
Good post, Curt. I see the same thing. Unless some new, exciting, and innovative services and/or products are made available then no significant wealth will be generated, and no jobs will be created. Combine that with the fact that we have an aging population that has low interest in buying anything except food and utilities then we will continue to see no, or slow growth. This idea that if you grant "job creators" tax breaks to create jobs is absurd. Why would anyone in a position to hire, hire anybody just because of a tax break? I mean, if there's not a line of people outside your business waiting to be serviced, or just dying to buy your product then why would you hire anyone? Personally, I'd do like they're doing and sit on the cash.
"Instead of a boost, government cuts have become a considerable drag on the rest of the economy."
That's your problem Mr. Reich. You believe government can be a boost. It is not a boost if every employee pay stub requires 40 cents borrowed in their dollar, not to mention future pensions and benefits. Get a grip.
This deflation is good, it will reallocate the capital and lead to a true boom in the future. Accept the pain, it is necessary medicine