Employment: Not As Good As It Looks

Back from a hiatus I want to begin by making a couple of comments about the unemployment data from the end of last week.

The unemployment report was fraught with analytical land mines. From one perspective the data looks good: the unemployment rate fell to 9.4% and the number of lost jobs was ‘only 247,000’ – the lowest for some time. Given the horrendous situation we are in these figures appear to be good.

“Economically: we need to focus on the number of jobs we create. Not the number we destroy.”

I suppose we have become so inured to the flow of disastrous information that the loss of a quarter million jobs can be viewed as positive. Frankly I think that’s absurd. We have been bleeding jobs now for nineteen straight months. That is catastrophic. We have lost over 6.7 million jobs during this down cycle – there is no way that fact can, or should, be glossed over. We seem to have developed a bunker mentality where we – those who are still employed – feel immense relief that, so far, we have survived that worst. So the announcement of a ‘mere’ quarter million lost jobs is taken as some sort of triumph. Nowhere is this ridiculous outlook more in evidence where stock prices react to the ebbing flood of misery with an immediate surge in expectation for corporate profitability. Such a reaction may be sensible given the drivers of Wall Street, but from the perspective of normal Americans it is superficial and short term.

Wiser is the view that, while the storm is abating, the really hard work lays ahead.

Why?

Because the data is misleading.

Yes the number of jobs being lost has obviously turned a corner: the blood letting is coming to an end. Corporations have defended profitability, and thus survival, by taking drastic and retrenching tactical steps. Amongst which they have slashed costs and cut jobs. Both these steps diminish the economy. They are retreats, not advances. And, even though the figures are better than the recent past, we are still in retreat.

To paraphrase Winston Churchill when he commented about the euphoria surrounding the evacuation of Dunkirk in World War II – a minor miracle if ever there was one: wars are not won through a series of brilliant retreats, no matter how brilliant they are. Sooner or later we need to go on offense.

Economically: we need to focus on the number of jobs we create. Not the number we destroy.

Lost in the data is the fact that the number of long term unemployed is now higher that at any time since the Great Depression. Plus, we are constantly falling behind our potential: even in good times our economy has to create over a quarter million new jobs a month just to stay even with population growth.

Think about that. Its like par in golf: just to keep our heads above water in terms of the unemployment rate we need to add – each and every month – the same number of jobs we lost last month.

So last month’s actual score vis a vis our ‘required employment level’ was that we fell half a million jobs further down.As of now we have lost 6.7 million jobs. Given that, in the same time we have been sinking, we should have created about 3 million new jobs this leaves us 9.7 million jobs short of full employment.

Not so good.

This is why it is naive to view the problems as ending any time soon.

There have been two critical aspects to this downturn right from its onset: how far down would we go? and how would we manage the exit?

There is no doubt – none at all – that the only reason we dodged a fully fledged depression was the huge role of government in the economy. It saved millions of jobs and bolstered the economy just as the private sector imploded.

This bolstering came not simply from the stimulus, which has saved about a million jobs so far, but also from the ongoing programs the government runs: Social Security, Medicare and Medicaid, unemployment insurance, and even defense spending. All these programs kept on running and thus kept money flowing. This flow provided an invaluable ballast to offset the retrenchment and outright retreat in the private sector.

It is unquestionable, by any reasonable person, that this stabilizing impact of government in the economy was the single reason we avoided depression. This should obliterate the Reagan/Bush mantra that ‘government is the problem’.

Just how much misery do Republicans and their ideological allies in academia want to inflict on society in order to ‘prove’ the superiority of their free market philosophy? The bizarre claim some of them have made that government should tighten its belt in order to show the nation that Washington ‘gets it’ is a negation of both leadership and patriotism of the first order.

And to make that claim from within the sanctuary of tenure, as many free market academics do, is putrid morality combined with appalling personal weakness. It is amazing to me that these folks can still criticize ordinary people trying to defend their livelihoods by resisting wage cuts by arguing that such resistance throws a wrench into the market’s ability to right itself.

Apparently their vision of ‘righting itself’ is when the boat finally settles at the bottom of the ocean. After we have all drowned.

Yet this is what they keep peddling.

Finally: just this morning [Monday] I read ‘analysis’ from Wall Street that the recent surge in stock prices is under threat as investors adjust to the likely nature of the recovery. It is now being described as a ‘U’ rather than a ‘V’. In other words the notion that we may be in for a slow and difficult climb back is finally settling in. Well, I suppose it’s better late than never, that investors reach an understanding that sustainable profitability will depend not on those brilliantly executed retreats but on the long strategic slog back to growth.

In a nutshell: the private sector collapsed; the public sector stopped us from drowning; now it’s up to the private sector to rejuvenate itself.

Let’s all see just how smart all those highly paid executives are: cost cutting is the easy part, and there are 6.7 million Americans who know the sharp end of corporate survival. Growth is much harder. There are 9.7 million Americans depending on corporate America to get out of its foxhole and get on with the real business of expansion.

Meanwhile: none of us should fixate over the ‘success’ of losing only a quarter million jobs. Yes its one small step along the way to a turn around. But no, it’s not a success.