What Jobs?

Hidden in all the fuss about the short term employment data, and that fuss is completely justified, are some really worrisome longer term issues. Let’s set the stage for Friday’s unemployment report, which we expect to be bad, but not as bad as last month – say another 550,000 jobs lost and the unemployment rate hitting 9.1%, by taking a look at our long term record.

So here are a few facts to chew on until the data is released:

If, as we expect, the economy shed another half million or so jobs, then we will have completely wiped out all the gains made during the Bush administration plus some. In total we would have added a meager 1 million jobs over the entire past ten years. That’s just awful. To put that in context: the adult population grew roughly 27 million and the workforce by some 16 million over the same period. It was the worst decade for employment since the Great Depression. The prior decade, from 1989 to 1999 saw over 18 million new jobs added.

Something is horribly wrong in America.

In 1999 the unemployment rate stood at 4.3%. Tomorrow we will go over 9%, and most analysts are now talking about a peak sometime in 2010 of around 10.5% to 10.75%.

Even more eye catching is the collapse of manufacturing: in 1999 we had around 18.5 million manufacturing jobs. Now the total is 12.4 million. That’s a loss of about one third of all our manufacturing jobs in a single devastating decade.

To say that’s terrible is an understatement.

The impact on the American way of life of these numbers shows up in wages and household incomes. The loss of all those blue collar, high wage, manufacturing jobs has contributed to a complete stagnation in the growth of incomes. The median income in the US was $50,641 in 1999 and had fallen slightly to $50,233 by 2007, which is the latest data I can find.

No wonder the country plunged into debt. The only way to keep a rising standard of living right through the Bush years was to borrow and hope that inflation drove your home price up enough so that you could pay the debt back.

Without the real estate bubble the country would have been forced to face the ugly reality that the promise of the American dream had begun to fade, if not disappear totally.

I have called the entire Reagan/Bush era one of illusion: the US simply buried its head in the sand and pretended its economy was running just fine. Debt replaced incomes growth. Productivity fueled profits but not wages. Innovation was centered on finance and not production. Stagnation, which was the downfall of Jimmy Carter, was eliminated by sleight of hand not through hard work or fundamental reform.

These long term job figures should shake you all out of any complacency. The road back to a healthy, prosperous, and sustainable growth path will be very difficult. The danger is that we will seek to take the low road once more. I hope not.

We must reduce debt. We must save more. We must limit our ambitions to within our means. And we must not avoid having calm, informed and adult conversations about our priorities. Even America cannot do it all. It never could.

We simply cannot afford to foist our failure onto our children.

It looks like they’re going to have a hard time finding a job, let alone pay the taxes that will be necessary to repay the debt we accrued while we were blinded by the illusion of the last three decades and silly references to cities on hills and so forth.

Let’s face it: losing another half million jobs is not a triumph. The misery and anxiety we have managed to create for those who suddenly face the reality of no income in an economy built on the sands of our recent economic policies is an outrage.

There will be those who look at Friday’s report and see hints of a turn around. That might be so. But I will be thinking of the families of the half million, and all the others before them, who have lost their jobs simply because we indulged in a huge experiment: the excessive and zealous belief that markets are always right. It was a dumb idea in the 1920’s and it was a dumb idea in the 1980’s through the 2000’s. We should have known. We did. We just chose the easy option: to forget.

To put it in the words of one of my intellectual heroes, Sir Karl Popper: the hypothesis has been falsified. The idea is definitively untrue. As in wrong.

So now we’ve learned what doesn’t work, maybe we should revert to what does?

We owe it to those hard working people who have just lost their jobs.

Economics is not about data. It is about people.

At least that’s the way I look at it.