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NationofChange / Op-Ed
Published: Saturday 5 May 2012
Employers added only 115,000 new jobs, down from March’s number (the Bureau of Labor Statistics revised the March number upward to 154,000, but that’s still abysmal relative to what’s needed).
The Stall has Arrived
The economy has stalled.
Friday’s jobs report for April was even more disappointing than March. Employers added only 115,000 new jobs, down from March’s number (the Bureau of Labor Statistics revised the March number upward to 154,000, but that’s still abysmal relative to what’s needed). We need well over 250,000 new jobs per month in order to begin to whittle down the vast number of jobs lost in the Great Recession. At least 125,000 new jobs are necessary each month just to keep up with an expanding population of working-age people.
With only 115,000 jobs in April, the hole is getting even deeper. Most observers pay attention to the official rate of unemployment, which edged down to 8.1 percent in April from 8.2 percent in March. That may sound like progress, but it’s not. The unemployment rate dropped because more people dropped out of the labor force, too discouraged to look for work. The household survey, from which the rate is calculated, counts as “unemployed” only people who are actively looking for work. If you stop looking because the job scene looks hopeless for you, you’re no longer counted. In the winter months — December, January, and February – hiring had seemed to pick up, averaging over 250,000 new jobs per month. Then the mini-surge stopped. The simplest explanation is that the mild winter across much of the United States gave an unusual boost to hiring then, leading to a correction by the spring.
Most of the job gains in April were in lower-wage industries – retail stores, restaurants, and temporary-help. That means average wages continue to drop, adjusted for inflation – continuing their long-term decline. Most of the new jobs that have been added to the U.S. economy during this recovery have paid less than the jobs that were lost during the downturn.
What does all this mean? Together with other recent data showing slower economic growth during the first quarter of this year, it’s safe to say the economy has stalled.
This is bad news for millions of Americans.
It’s also bad news for Obama and the Democrats. Voters don’t pay much attention to the economy in an election year until after Labor Day, so it’s not necessarily a huge help to Romney and the Republicans. But it’s a bad political omen nonetheless.
No set of policies between now and Election Day are likely to expand the economy. To the contrary, government at all levels continues to contract, acting as a fiscal drag when government needs to be doing the exact reverse – boosting the economy through additional spending. In 2013, when spending major cuts are scheduled, we’ll fall off a fiscal cliff.
Obama needs to push back loudly and clearly, saying he won’t support additional spending cuts until the economy is showing clear signs of improvement.
But widening inequality is the underlying culprit here. As long as almost all the gains from economic growth continue to go to the top, the vast middle class doesn’t have the purchasing power to boost the economy on its own. And rich Americans spend a much smaller portion of their incomes than does the vast middle class. Their marginal satisfaction from additional spending falls off. The second yacht isn’t nearly as much fun as the first.
Get it? We’ve still got a terrible cyclical problem – we can’t get out of the gravitational pull of the Great Recession.
Yet the underlying problem is structural, and it’s been growing for decades. The structural problem of stagnant or declining real incomes for most people, and soaring income and wealth at the top, was masked during the boom years when the middle class could turn their homes into piggy banks and extract home-equity loans or refinance. But the mask came off in 2008 as home values plummeted.
There’s no way to put the mask back on. We’ve got to face the truth. Obama and the Democrats have to explain to the American people why inequality isn’t just unfair; it’s also economically unsustainable.
This article was originally posted on Robert Reich's blog.
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ABOUT Robert Reich
ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
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By Richard (RJ) Eskow
21 comments on "The Stall has Arrived"
May 07, 2012 2:28pm
How can they say how many people are looking for work?They're generally only counting those getting unemployment who, by the rules, have to certify they are looking. A third to half of the unemployed don't get unemployment, and then there'sthe UNDERemployed.Too many of the jobs numbers are statistical guesses.We need to have more real numbers to make good policy decisions.
May 06, 2012 10:36am
The health insurers want to charge more for their insurance if you are fat and they will probally get away with that. My guess is that people are fat because they have to put up with the lies of politicians!! its stressful and makes you overeat.
What about gay people they are more at risk then the general public to contract aides. African americans have a higher degree of heart disease and die earlier so raise their premium. Hookers are more at risk for aides, beatings, and v.d.
The list goes on and on so why not charge a higher tax on greedyness thats one of the seven deadly sins. We need more money to cover our citizens.
I still say the money is in real estate with the Chicago area having a nine month supply of housing just take those houses under eminent domain pay the banks off and raise enough capital to pay off our debt. Keep doing that until we owe no more to any one person or foreign country. Look for the money and take it. The health insurance Companies looked and found a big fat target so why cant we. Take the money no one can stop us if we all agree to do this. Why is self preservation so difficult when corporations need to self preserve they say in order to stay in business they need to cut American jobs, hire h2b s and outsource. We need to get the money from a source that wont complain which is real estate. Put people back in houses for the price of a lottery ticket, create wealth using backwards piss.
May 06, 2012 8:43am
Well after over three years of sending out resumes I finally accepted a job at a third of what I used to earn. This allows no savings or retirement, but its a job.
We have learned a lot about survival and spending priorities and those won't change even if I find something better. I suppose my finding a job will be counted as a gain whereas before I wasn't counted at all. It is a "brave new world".
May 05, 2012 9:59pm
The Republicans are still crying the same old mantra that their policies will turn the economy around. They do not want to accept voodoo economics is the downfall and the reason why the system isn't working. There's a great imbalance when the bulk of the income goes to the very top and the rest are struggling to hold onto their middle class status. If it doesn't change we will become a Banana Republic.
May 05, 2012 8:30pm
You are spot on!!
May 05, 2012 7:44pm
The disparity of wealth is a direct consequence and direct GOAL of the reaganduybanomics system of taxation. This set of fraudulent economic policies has accomplished exactly what it set out to do - destroy America.
May 05, 2012 2:17pm
Nothing will happen until the economy totally collapses, and the Republican/Conservatives lies will no longer work. "You too can be rich like us, and if your not, then you aren't working hard enough" Similar to the Faith healer, the blind can see again, and the deaf can hear but only if your FAITH is strong enough. If not, you will remain blind and deaf because your FAITH wasn't strong enough. Disgusting that they can get away with this crap.
May 05, 2012 2:10pm
If the house of representatives is not overturned we can look forward to more misery, including more austerity.
All these Republicans have taken the Grover Norquist pledge. But without tax increases the only way to reduce the deficit will be through cuts to "entitlements". Elderly Republicans do not understand this, however. How would they, they get all their information from misinformation sources. They are under the mistaken notion that cutting things like NPR and public broadcasting will significantly cut the deficit.
Make no mistake, the misinformation is flying. I heard one Republican on Fox "News" tell the listeners that medicare was a Republican creation. Incredible.
May 05, 2012 2:09pm
That "Economy at a Glance" image might be interesting...if it linked to an image large enough to actually read the print.
May 05, 2012 1:49pm
Hi Robert, Two years ago at Saul's you told me how deep the hole was and that getting out of it was a hugh challenge. I feel that, like you, we desperately need a new version of the CCC and the WPA and an American Peace Corp to put people into work that can rebuild both the people and our country. Why is Obama not pushing for this? Is it the Congress that is the excuse? Can't he just mandate these programs? I am so happy you live here in N. Berkeley and I brag about having the best brain in this country right around the corner.All good wishes,Mitzi Trachtenberg
May 05, 2012 5:30pm
I'm not an economist, but I understand fallacies and what are called "necessary" and "sufficient" conditions. The world economy founded under capitalist underpinnings is not a sustainable economic structure, as we know it. Yes, there is a slump coming, and yes, it will get worse.
Of course our idiot "leaders" simply count differently to make things look good, like Robert points out. Under the current method of calculating unemployment, we could have real 99% unemployment and the numbers could say 100% employment.
What I see happening right before our eyes is a sub-economy being built around us. It's founded on a marketplace of millions of unneeded workers, which drives wages lower and lower. The workers that are necessary to keep this subeconomy going, scientists, some number of farmers, and other technology like jobs are well funded and the people who fill them well paid. The rest of us are "unncessary."
In other words, a very large (I don't know how large, but could be in the billions) number of people are going to be economically worthless to a capitalist economy. They will simply be ignored. The necessary component of our economic structure will be well protected and mostly live in well protected areas, while the unnecessary people will be virtual on the outside of the new, much smaller, and virtual slave economy. The new economy, like the old, will be ran according to crony capitalism, where the top manipulators don't compete with each other directly, but work together in order to keep power structures intact.
In other words, no middle class. We'll have a very small minority that claim the vast amount of land, water, and all other resources--because resources are where the real power lies (resources are the main reason wars are fought); while the vast, vast majority will have nothing more than the cloths on their backs. Don't believe it? You should take a trip to India or Brazil.
May 05, 2012 5:11pm
MITZI, the problem with CCC and WPA is that the USA is broke. I'm all for it, but these are different economic times compared to 1930. I don't know what the cure is today, if there is one.
May 05, 2012 1:49pm
Obama=Romney, Democrats=Republicans. Just look at who pays them. We definitely need something new. When it gets bad enough and people really understand it, that something new will come.
May 05, 2012 1:48pm
"Great Recession," Dr. Reich? The breath and metrics of this sucker could be worse than the 1930s depression. Forget the euphemism and call it what it is: another Great Depression. The next generation will.
May 05, 2012 1:48pm
Obama=Romney, Democrats=Republicans. Just look at who pays them. We definitely need something new. When it gets bad enough and people really understand it, that something new will come.
May 05, 2012 1:21pm
What we have in America is 'tinkle down' economics. The folks at the top do the tinkling and the rest of us get tinkled upon. The funny part is just how many tinkle'ees think that rain is actually "golden".
May 05, 2012 1:20pm
I think Democrats including President Obama has been making the case that giving more to the top one percent is counter productive but it is quite obvious Republican law makers are hell bent on giving even more to the wealthy. Its the people, voters who have to wise up. Best they do it before the first Tuesday in November.
May 05, 2012 1:05pm
While it is true that the stagnation of the economy may be bad news for the Obama administration, and - more specifically - the Campaign to Re-elect - there is another thing to take into consideration, which your comment at the end of the article ignores. Where you say that "Obama and the Democrats have to explain to the American people why inequality isn’t just unfair; it’s also economically unsustainable[.]" you seem to forget that the opposition has constructed a fiction surrounding the economy that does not, in any way whatsoever, include any of the accomplishments that have been made by Obama and his administration. Yes, you were correct, the stimulus packages should have been larger - do doubt - but they weren't, and the nation did with what they were given (even in areas where they said they didn't want "handouts") - and Obama is still vilified ... "he made things worse" Romney gleefully (if that word can be used for Gov. Roboto) announces at every opportunity ... no, Mr Romney, President Obama did NOT make things worse - he inherited a beaten up, broken down, whipped and wasted economy that George W. Bush had taken 8 years to de-construct after President Clinton left him with ... what's that word ... we don't hear or use it too often anymore ... oh yes - a SURPLUS!
That's the problem here - the GOP is so brainwashed into believing that Obama is so bad - that he's worse than the Antichrist (if not the actual Antichrist) that the only possible solution is the destroyer of companies himself, the Reaper of Wealth (for himself), Mitt rMoney - I mean Romney ... can't imagine how that happened.
If people want to see the economy move tell your retailers to buy American - tell them that you're willing to pay a few bucks more to support your local economy. Buy from your local market instead of the big box stores - they have plenty of customers - the local markets are going out of business because they can't compete with big box stores selling crap made in China - if you want crap, you get what you pay for ... and your economy will, in the end, reflect that too.
May 06, 2012 1:56pm
Point well taken. I think we might do better just not buying some much of everything. Shopping has become a form of crack for the middle class. It's not the crap that creates the problem, it's the NEED for crap that causes our grief. When you want less, you suffer less.
May 05, 2012 10:05pm
Good points! and I agree, we need to buy American and pay a few extra bucks to get something better made. Obama is trying to encourage more jobs at home but I haven't heard Rmoney talk about how he will create them here.
May 05, 2012 1:02pm
Agreed. Republican return (if they ever left) to the debacle known as 'Reaganomics' is truly unworkable. We should all know what 'trickle down' truly means: biologically, we do know. It is no different economically: the people at the top do the trickling, and the middle class gets trickled upon.