Jobs: So What?

I don’t want to sound unduly negative. Today’s report on unemployment is good news. Sort of. The economy added 216,000 new jobs and the unemployment rate slipped very slightly to 8.8%. Terrific. Especially for the newly employed. Well done everyone.

But.

We all know what the caution should be. This is good news only if we recall that we are still stuck deeply in a massive employment hole. The percentage of Americans of working age who are actually employed is miserably disappointing. It is so far from the recent peaks that the chance we return there any time soon is as remote as those peaks now appear.

Plus wages are just not responding to the recovery. In the past twelve months wages have crawled up 1.7%. But inflation has been 2.2%, so real wages have actually declined, thus dampening demand.

The optimists are already out in force arguing that a few more of these reports and the Fed will pressed into raising interest rates in order to take the steam out of the economy. We pessimists and malcontents are being dismissed as wrong … again.

But, I ask, what steam?

I do not want to denigrate what is true progress. But I want, instead, to focus us all on the limp nature of our employment policies – or lack thereof – and on the real chance that we are about to reverse this progress by attacking government payrolls. Within the overall report was the news that government at all levels in the economy shed around 15,000 jobs last month, which makes it the fifth straight month of government job losses. There are those, of course, who imagine that losing government jobs is not a problem because they are not “real jobs”. Tell that to the families of the newly fired workers. Jobs are jobs, and we are risking the recovery by cutting any.

So, what steam?

The economy is chugging along growing at around 3.0% to 3.5% a year. This is probably about as good as it will get for a while. Next year it will start to settle down from that number, and end up more in the 2.5% range. That’s scarcely at its long term trend line and is insufficient to break the back of our longer term problems. By any post-war standards this is a very lame recovery. To the extent that the economy is back on a secure growth path, all the pre-crisis problems have returned to haunt us. The banks remain unstable. The financial system is now more prone to disaster due to its increased concentration and reliance on government largesse, so we taxpayers are even more vulnerable to big bail out checks. Our long term budget is still out of balance, and no one seems inclined to do anything about it. Income and wealth inequalities are still growing, so the pressure on the average household is still increasing rather than decreasing. Businesses are still not investing their cash, so we are not refurbishing our factories, or innovating to boost productivity. And profits scarf up a disproportionate share of productivity anyway, so even if we improve productivity workers will not see the fruits of that extra effort.

In short, we have not moved forward.

After all that crisis, the expenditure, the pain, and the disruption, we have returned to the same spot we were in when the banks threw us over the cliff. The opportunity to change course has been spurned.

Some people obviously applaud that result. I don’t. The imbalance between rewards to wage earners, and those to capital holders, is a source of future instability. Both social and economic. Hard pressed families cannot ignore the neglect of their plight for ever. The hubris of capital cannot be prolonged before it becomes self defeating. The indifference of our elite to the problems of ordinary households is the hallmark of our times. It is the single salient explanatory factor that makes sense of our leadership’s efforts to preserve the past, and to return to the status quo ante.

Let me make this stark:

Last year profits rose 35%. That’s the best annual performance since 1950. Meanwhile wages fell after inflation by 0.5%. This is a long running story and that dichotomy is too dramatic to ignore. It is a reversal of the immediate psot-war years. That separation in the distribution of the benefits of our return to growth is the context within which we will play out the next decade of policy making.

Has our elite – our political, business and academic leadership – abandoned the rest of the country? If so, how do we force our way back onto the agenda? How do we communicate that we still exist? Through irrational action, or angry explosion, like the Tea Party movement? Or through a more thoughtful push back against the world view that so enthralls our leadership?

Back to the jobs report: the optimists are assuming that the status quo ante was sufficient. So today’s numbers look fine and suggest a trend back to “normal”. My view is that their “normal” was no good. In fact that normality produced the crisis due to it internal imbalances. Their tolerance for the imbalance is based upon the asymmetry of outcomes, or effects, they produce: the middle class, and workers generally, bear the burden of their correction, while the elite is unmoved and hardly touched. Exhibit ‘A’ being the ease with which our bankers have returned to their enormous pay checks as if the damage they wrought never occurred. Without introducing a re-balancing of the asymmetry we are doomed to repeat the crisis soon. Too soon.

Jobs: so what? We want more than that. We want wage growth too. Fairness is word not often used because it is so hard to identify what exactly we mean by it. But we need a fair economy. And we need to start working out what that implies before the elite vector too far away and can only be brought down by efforts more similar to the Tea Party.

That thought alone should jolt us all into action.

I hope so.