It is getting harder to sell the “recovery right around the corner” story. I have been stressing the structural nature of current problems because there is a lot riding on our understanding of what is happening. If we remain passive, hoping that existing policy is sufficient to nurture the alleged “green shoots” of recovery, we are likely to end up with an economy largely unchanged from the past. That outcome, while attractive to the few with power and wealth, largely guarantees a future of steadily worsening living and working conditions for the great majority.
So, how bad are things? As the Financial Post describes:
The U.S. economy has lost the equivalent of every job created in the past nine years. All job growth since the final year of the dot-com bubble, its recovery from the bust, and the ensuing six years of consumer-driven boom is now gone, leading some economists to fear an outright decline in wages will be next. Others believe the United States is on track for a painful “jobless recovery.”
“This is the only recession since the Great Depression to wipe out all jobs growth from the previous business cycle, a testament both to the enormity of the current crisis and to the extreme weakness of jobs growth over the business cycle from 2000 to 2007,” said Heidi Shierholz, an economist at Washington-based think tank The Economic Policy Institute. . . .
Since the recession began in December 2007, the jobs market has shrunk by 6.5 million positions, pushing the unemployment rate up 4.6 percentage points to 9.5% — the highest rate since 1981. Nine million part-time workers are in want of full-time jobs, and a record 29% of unemployed have been jobless for more than six months. . . .
The employment market’s problems do not end at job losses. Earnings are under pressure. Average hourly earnings rose an annualized 0.7% in the past three months — the smallest gain since records began in 1964. The annual change in hourly earnings slipped to a rise of 2.7% from 3% the previous month. “Wages will soon be falling outright, a classic deflation signal,” said Ian Shepherdson, the chief U.S. economist at High Frequency Economics.
Compounding problems, average hours worked fell further in June to be down 0.8% to a cyclical low of 33 hours a week. The average workweek has shrunk 8.2% since the start of the recession, placing added pressure on household cash flows. It also means employers will be slow to hire because there is ample room to increase work hours.
The administration needs to be pushed to take much stronger action—its modest stimulus program is not enough to reverse downward pressures and, once its effects dissipate, those pressures are likely to intensify—this could be 1937 all over again.
We need real structural change—in how work is organized and compensated, in how social programs are financed and delivered, and in how the economy is organized and directed.