The Horrendous Jobs Report

There is bad economic news and there is terrible news. The former will contain at least some rays of light, some reason to hope that the worst is over. The latter can at least be spun this way or that, as in: yeah, it's really crap, but hey, not as much crap as some people expected!

And then there is this month's job report. One is almost tempted to employ some Biblical term or maybe invent brand new words. Let horrendous stand for the moment. The uptick in the unemployment rate was the least discouraging news, though it was discouraging enough. From Reuters:

If the labor force, which shrank again, was as big as it was when President Obama took office, the unemployment rate would be north of 11 percent. As it is, the broader U-6 measure [the most inclusive measure of people who want but can't get jobs] surged to 16.2 percent from 15.8 percent.

The really bad news is in the actual job creation numbers. From the Washington Post:

The 18,000 jobs U.S. employers added to their payrolls in June was less than a fifth of what economists had expected and far below the 125,000 or so needed to keep up with an ever-growing population.

This bad news was also retroactive.

Job growth in April and May was revised downward by a combined 44,000 positions. Temporary employers, often a leading indicator of future activity in the labor market, cut 12,000 jobs.

There is no way to spin this to look less than horrendous. The United States has enjoyed the greatest job creation machine in the developed world since WWII, but that appears to have broken down. President Obama is likely to face reelection with the worst jobs record and worst economic recovery since the Great Depression.

The obvious question is what to do about it. One popular theory is that jobs growth can only be restarted by public spending. This view is inspired in large part by an interpretation of economics in the 1940's. According to this view, it was the massive war spending that got us out of the Depression.

There are two problems with this argument, even if the interpretation of the 1940's is right. One is that the government is already spending at WWII levels. Would it really help the economy to increase the debt to 150% or 200% of the GDP? The other problem is that, unlike the U.S. in and after WWII, we now have a structural deficit poised to balloon the debt to unprecedented levels even in the absence of more "stimulus" spending.

I think that this interpretation of post-war economic history is altogether wrong. What got us out of the Depression was millions of Americans returning victorious from war, eager to start families, and believing that they could accomplish anything.

I have no idea how to replicate that. I do have some suggestions. First, we need to examine the costs that the federal and state governments impose on every employer who takes on a new employee. At least we should let employers know what it is. One reason that the health care reform is problematic is that employers can't be sure what those costs will be.

Second, we need to convince the public at large and all those who manage business large or small that their governments can become fiscally responsible. For a half century the Congress and the state legislatures have made promises that they could not possible hope to keep. That has to end. A sense that government is becoming responsible won't energize job creation, but it might at least stabilize it enough that we can start digging out the hole we are in. A good start would be for Congress to pass a budget and a longer term plan for managing the national finance. It would have to be a real budget, and not a ten year plan that puts off all the pain until the eleventh and twelfth years.

I am not at all sure that this is possible or that it would lead to robust job growth. I am pretty sure that there are no other real options. We are in big trouble right now. Not the least of our problems is that a lot of us seem invincibly resistant to reality.

Comments

[Donald Pay]

You mean those Bush tax cuts and their recent extension haven't created jobs? Can we now admit the failure of Republican tax and fiscal policies, end Republican obfuscation, and get on with policies that will create jobs?

[Donald Pay]

Even in conservative South Dakota some people are beginning to understand what's been happening to the middle class.

http://mitchell.areavoices.com/2011/07/08/jobs-and-concentrated-wealth-and-the-debt-ceiling/

[caheidelberger]

A lot of the unemployment comes from cutting government jobs. This is a good thing, right?

http://www.npr.org/2011/07/08/137696084/government-sector-isnt-adding-new-jobs

[Rev. Brian Carpenter]

I think your analysis of why the postwar boom did so well is more than a little trite. It was more than just optimism and a can-do spirit.

Because of wartime demands the country experienced full employment during the war. Because of rationing for the war effort there was no place to spend much of that money, and there was a patriotic impulse to buy war bonds (and thus to save.) Also, America's industrial infrastructure was totally intact, whereas everyone else's had been seriously damaged or even decimated.

So the average GI came home to a situation where he was eager to settle down and work and start a family, where there was pent-up demand for consumer goods, money in savings, enormous productive capacity which needed to be reallocated to civilian use, and a built in worldwide demand for our products because everyone else's manufacturing infrastructure was badly damaged. Even an ignoramus like Obama could succeed under those conditions.

When I told a British friend that the Second World War was the best thing that happened to us economically, he said, "It bankrupted us."

[Ken Blanchard]

Cory: congratulations on finding the fragment of spin!

Donald: the argument that we shouldn't raise taxes in a recession (Republican) and the argument that we shouldn't cut government spending in a recession (Democrat) are the same argument. By the way, Obama is President now.

[Donald Pay]

Obama is pursuing Republican-lite policies, by the way.

False arguments and bumper sticker economics get you nowhere. You can both raise and lower taxes in the right places and cut and raise spending in the right places. Raising taxes on the rich corporate executives and megacorps that offshore jobs to provide tax cuts and government spending for middle class job creators and innovation is what we need.

[Bill Fleming]

What is the sculpture in your visual, KB? And who is the artist? It's great.

[Ken Blanchard]

Donald: Your targeted taxes frequently miss their targets, as in the case of taxes on corporate jets. We've tried it before. What really counts, however, is the effect of taxation and public spending on the balance between consumption and investment. I suspect that the historical norm of 21% (revenues as a percentage of GDP) is about right.

[Ken Blanchard]

Bill: it is very striking. It's from the FDR memorial on the Mall in D.C. The memorial as a whole is way too big for its own good, but the sculpture is good enough for government work. The sculptor in this case is George Segal.

[Ken Blanchard]

Rev. Carpenter: I think that your explanation is a little more elaborate but compatible with mine. Yes, there was "enormous productive capacity which needed to be reallocated to civilian use", but that capacity obviously existed before the war; otherwise it could not have been ginned up during the war. I continue to think that the psychological effect of winning the war coupled with the self-discipline learned during the depression and the war best explain the post war productivity.

[Donald Pay]

When the wealth is at the top and the middle is hollowed out, you've got an economy that is broken, and "historical norms" won't work. Which historical norms, by the way? Republican leadership is in denial about what has happened to the economy. They get paid by the rich to ignore that their policies, followed over 30 years, have devastated the middle class, which is the generator of jobs and societal well-being.

[Bill Fleming]

Wow. That's what I would have guessed. I'm more accustomed to seeing his works in white patina. Thanks for the info, KB. Segal is a true master in my opinion.

[duggersd]

Bill, that whole FDR memorial is amazing as it is massive. If I recall correctly, it has quartzite from SD as a part of it. I am not an art critic, but when I saw the the memorial for the first time about five years ago, I saw it as a fitting tribute to the father of big government.

[Bill Fleming]

That's the cool thing about art, DuggerSD. The viewer completes an immediate dynamic emotional transaction via the form. The "meaning" comes long after the fact in an effort to "explain" the feeling (a hopeless cause.) You're right, you're not an art critic. Be glad.

[Jimi]

Donald,

"They get paid by the rich to ignore that their policies, followed over 30 years, have devastated the middle class, which is the generator of jobs and societal well-being."

Who is in charge now?