Bad news for the U.S. economy and for Barack Obama. We’re in the jobs doldrums. Unemployment for June is stuck at 8.2 percent, the same as in May. And only 80,000 new jobs were added.
Remember, 125,000 news jobs are needed just to keep up with the increase in the population of Americans who need jobs. That means the jobs situation continues to worsen.
The average of 75,000 new jobs created in April, May and June contrasts sharply with the 226,000 new jobs created in January, February and March.
In Ohio yesterday, Obama reiterated that he had inherited the worst economy since the Great Depression. That’s true. But the excuse is wearing thin. It’s his economy now, and most voters don’t care what he inherited.
In fact, a good case can be made that the economy is out of Obama’s hands — that the European debt crisis and the slowdown in China will have far more impact on the U.S. economy over the next four months than anything Obama could come up with, even if he had the votes.
It’s also out of the Fed’s hands. No matter how low the Fed keeps interest rates, it doesn’t matter between now and Election Day. Companies won’t borrow to expand if they don’t see enough consumers out there demanding their products. Consumers won’t spend if they’re worried about their jobs and paychecks. And consumers won’t borrow (or be able to borrow) if they don’t have the means.
Yet Obama must show he understands the depth and breadth of this crisis, and is prepared to do large and bold things to turn the economy around in his second term if and when he does have the votes in Congress. So far, his proposals are policy miniatures relative to the size of the problem.
The real political test comes after Labor Day. Before Labor Day, Americans aren’t really focused on the upcoming election. After Labor Day, they focus like a laser. If the economy is moving in the right direction then — if unemployment is dropping and jobs are increasing — Obama has a good chance of being reelected. If the jobs doldrums continue — or worse — he won’t be.
This post originally appeared at Robert Reich’s Blog and is posted with permission.
6 Responses to “The Jobs Doldrums and Obama’s Future”
".. will have far more impact on the U.S. economy over the next four months than anything Obama could come up with, even if he had the votes."
Wrong.. a properly sized stimulus package, or a comprehensive employment for everyone policy would pull the economy out of its slump immediately. There just are not the votes for rational, public interest macroeconomic policy. Evidently, we need a war of some kind.
Stimulus? Oh my god you are so clueless. We need the deleveraging. It is slow steady pain at this point but necessary. I could care less who is the president. It is Congress that controls the policy and banks (FED) that controls the markets. Stimulus is just a handout to future creditors of this country and generational theft.
Yes, banks and households are deleveraging and should do so. Why should that kill employment and put us in a long depression? There is no necessary relation between the two, since the money for deleveraging is available.. people are eager to buy the government's bonds at zero rates, and the government prints the money anyhow. We won't be at the inflation bound before employment is healthy again.
On the theft point.. when has anyone ever paid the debt back? Never. It is like corporate bonds or mortgages. The nation suffers under an enormous debt burden (debt bomb! prairie fire!) from those as well, but somehow, no one seems to care, or calculate how much each person must "pay back", etc. Debt = wealth. Unless, that is, it can be called in by jittery creditors, at which point it becomes a source of instability. Which is precisely not the case with the federal debt.
"the money for deleveraging is available": really? I don't think so.
There is about 10X leverage in the global economy. The US government is about 15X leveraged if you include obligations. I agree not all debt has to be repaid but there is just not enough money out there when the deleveraging occurs.
The US treasury bubble is enormous and simply a symptom of fear and the reserve currency status we obtained last century. It too will burst and that will be the most inflationary event of our history. Just as we saw the warm winter of 2012 pull forward the employment data this year, malinvestment and inappropriate leverage has pulled forward 3 decades of earnings into an economy that is now unsustainable. The savings rate in the US is too low and this indicates insufficient capital to lift the economy. Government spending is not going to lift an economy when all it does is lead to further leverage. Banks have created a lot of money but not with good investment. The confiscation of money through inflation is stealthy enough to not be noticed by the majority of citizens. We will have a hyper-inflationary depression in the next few years if the money printing continues. We are in a low inflation depression right now. The hyperinflation will occur when the system of corrupt banks are failing with insufficient reserves (easily seen in the EU). Cheers Burkbraun.
Successful companies can not be automatically expected to create jobs. The Successful traditional industries themselves are not able to create jobs for the following reasons:
1) Manufacturing is going high tech. Now even warehousing and online distribution centres have gone High Tech. This translates to fewer jobs.
2) Virtual economy created by Facebook, Google or Microsoft which creates wealth without creating corresponding jobs, as the old economy did.
So look elsewhere for jobs.
There's already plenty of inflation now.If you have no memory of what you paid in the past and just read phony govt reports on inflation,you think inflation is tame.I can tell you it isn't.Like,former .05 candy bars selling for .99-1.39.How about cheap shoes selling for $30-$40.All kinds of product downsizing at supermarkets.How about cereals selling for $4.50 a box and are smaller than a couple years ago.Consumer reports said one paper towel brand had been downsized 8 times.How about the average car now selling for about $33K.I remember,as a kid, my rich uncle buying a new Cadillac for $6K and we were amazed.Some day this abused Dollar is going to go into freefall.The Dollar has no backing,other than the confidence in our govt.How much confidence can their be in a govt that borrows 40% of what it spends and the Fed monetizes the deficit.