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Is the US Jobs Crisis Here to Stay?
John Talton of the Seatle Times reports, Why the US is in a jobs crisis:
The
situation is nicely encapsulated by economist Nouriel Roubini's tweet
this morning: "US economy now close to stall speed. From anemic
recovery to tipping point to stall speed and growth recession. Is a
double dip next?"
The economy only created 54,000 jobs last month. It
takes between 125,000 to 150,000 net new jobs a month just to keep up
with the organic numbers of people entering the labor force, much less
make up for the losses of the Great Recession.
Unemployment
"officially" stands at 9.1 percent, the real rate much higher. "To
remind us what a healthy unemployment rate looks like, four years ago,
in May 2007, the unemployment rate stood at 4.4 percent, and 11 years
ago, in May 2000, the unemployment rate was 4.0 percent," according to
economist Heidi Shierholz of the Economic Policy Institute.
"The U.S. workforce needs the pace of job growth to accelerate
dramatically in order to re-establish full employment within any
reasonable timeframe, and instead, the recovery is on pause."
Put another way, by the blog Zero Hedge, the
U.S. would have to create 250,000 jobs a month for 66 months just to
return to where unemployment stood in December 2007 by the end of
President Obama's second term. But why is job creation broken?
It's an area where we need urgent research and sober debate. I can think of these reasons:
- The stimulus and the Federal Reserve's
QE2 failed. They arguably prevented worse unemployment and deflation,
but it's impossible to prove a negative. The stim was particularly
ill-suited for job creation — heavy on ineffective tax cuts, light on
infrastructure. Too much of the Fed's money was used to save the Wall
Street playerz, then let them make a new killing off it.
- Business models have changed. Many
companies have found ways to do as much or more with fewer workers.
Thus, record corporate profits and cash on hand haven't translated into
much hiring. Offshoring, technology, doubling-down on the existing workforce and continuing industry consolidation all play a role.
- The
negative feedback loop continues to discourage hiring: The housing
collapse (where so many jobs were created in the 2000s); millions
struggling with the consequences of losing their homes or being
underwater on mortgages; 10-year wage gains worse than
during the Great Depression, lowering buying power and hurting
business; many small businesses, a key engine of jobs, unable to get
loans; government fiscal crises hurting investment and education, as
well as causing layoffs in this sector and hurting small private
vendors.
- The jobs-skills disconnect. Millions
of jobs for the housing bubble required relatively few advanced
skills. But manufacturers now complain they can't find the workers who
have the training to handle the leading-edge jobs they have. This is
even more pronounced in advanced technology sectors.
- The dogma about tax cuts for the wealthy leading to job creation doesn't work. Indeed,
job creation during the George W. Bush administration was some of the
worst since the Hoover years, but it was cloaked by the housing bubble.
Meanwhile, the political climate won't allow for more aggressive
job-creating stimulus, such as infrastructure spending.
- The
capital markets have disconnected from their traditional role of
assembling funding for productive, job-creating enterprises. Much of the big profits come from trading or job-killing mergers. LinkedIn and Groupon
are clever and will siphon off billions of dollars in investment. They
will create relatively few jobs. Even seemingly traditional large
corporations spend time making profits trading on Wall Street rather
than using the money to hire. Meanwhile, the finance sector is among the most politically powerful and will protect the status quo.
- The hollowing out of much of the economy is real and it has happened in sectors that once created millions of jobs.
Tens of thousands of factories closed during the 2000s, and not just
in the auto industry. The textile and apparel sectors in the Carolinas
were devastated by NAFTA and China's entry into the WTO. Again, this
was cloaked by the housing bubble.
- The recovery has never been broad-based, and businesses have been faced with ongoing uncertainty. President
Obama did himself no favors here with the complex health revamp,
although it is a huge windfall for the insurance industry. But the
uncertainty also includes the price of oil and the future of energy
costs.
- The sectors once called "high tech" (but almost
everything involves high tech now) are not creating large numbers of
American jobs, as retired Intel Chief Executive Andy Grove has pointed out. As companies "scale up" they are no longer doing much hiring of Americans.
- Some
will point to immigration, and in the 2000s the U.S. saw its largest
wave of immigration in its history, even larger than 1890 to 1920, and
much of it illegal. The academic evidence points to immigrants being a
net plus in terms of economic output vs. their cost in social services.
But it's also true that easy
immigration helped drive down wages. Yet this took place as American
business as a whole adopted Wal-Mart's low-wage, part-time,
minimal-benefit model. "Consumers" got low prices, but unfortunately they also suffered as workers. Who to blame here?For all the political theater, America has a jobs crisis much more than a debt crisis. Until it fixes the former and creates broad-based growth, it can't meaningfully address the latter.
I
totally agree with many points expressed in this article, especially
the last point on America's jobs crisis being far more important to fix
than the debt crisis. Right-wing pundits have been busy spinning the
debt crisis but the reality is unless there is a meaningful and
sustained jobs recovery, the debt crisis will never be addressed. And
don't believe anyone who tells you otherwise.
How do I know
this? Just look at Greece. Austerity is a disaster, pushing their
economy to the brink. Greece doesn't have a manufacturing base
and relies almost exclusively on tourism and shipping as the pillars for
its economy. Young and smart Greeks are leaving the country not
because they want to, but because there are simply no opportunities in
the private sector. Greek policymakers are doing absolutely nothing to
address serious structural issues in their economy.
That brings me
to my next point. The real crisis behind the jobs crisis in the US and
pretty much the rest of the developed world is the leadership crisis.
Politicians and policymakers are spewing the same old ideas. Liberals
want to increase deficit spending while conservatives want to decrease
taxes and cut spending. Same old, same old. There is nothing new in
these policies based on ideology. Nobody has the courage to take on
interest groups and admit that there is a fundamental problem with the
current trajectory.
What really worries me from a social
perspective is that the disconnect between the financial system and the
real economy is widening income inequality. QE2 hasn't done much for the
real economy yet, but it's been a boon for traders and money managers.
The financial oligarchs couldn't care less about what's going on in the
real economy, and neither do America's corporate titans. All they care
about is their total compensation which continues to rise to record
levels while millions struggle with unemployment.
Unless something
is done to address structural issues in the labor force, including the
ever widening income gap between the haves and have-nots, a whole
generation of workers will suffer from chronic unemployment and along
with it, loss of job skills, loss of dignity, and most worrisome,
chronic mental and physical health problems that will put additional
pressure on public spending.
Now is the time for our political
leaders to step up to the plate and address the jobs crisis. If they
don't act quickly and forcefully with fresh and courageous ideas that
work, then capitalism as we know it is doomed. If this sounds too
"Marxist" for you, then you're ignorant of history and how human beings
always repeat the same mistakes. Somewhere down there, Marx is grinning
in his grave. I leave you with an interesting discussion from ABC's This
Week on the prospects for the class of 2011.
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Just don't startle him in the process. He might flinch and drop the damned thing.
Failed in what way? Smithian economics works. It fails when people try to sell it for what is not, like axed around job creations. It is not.
Accumulation of wealth in an area, betterment of the general environment is naturally followed by more expensive cost of living on that area.
Never misses.
Failed in what way? are you a troll or blind, deaf and dumb? Look around you 44.2 million americans on food stamps, a declining standard of living for the majority of the population. Unemployment is near 20% using official DOL u6 numbers and likely nearer 29 per cent using real numbers, record foreclosures, defaults, and bankruptcies.
Corruption rampant in washington, mortgage fraud committed by the biggest banks in the nation and no prosecution by any state or federal law enforcement bodies.
if this is a succesful thriving economic system, than indeed I am mad and you are sane, however should the reverse be true and we are indeed in a bit of a hoary pickle than I think it fair to say our economic system has failed and you are oblivious.
If you have bitten the bait that the type of economy promoted by the US is focused on job creation, you are the blind man.
It is quite easy to made a failure: give an objective that it is not supposed to be carried out.
Smithian economics has always aimed at concentrating wealth. Concentration of wealth is the heart of it.
Does it fail to deliver on this objective? Absolutely not.
Does it fail on getting people scratch less their bottom? Absolutely yes.
You can't return jobs when greedy corporate America has found a way to plunder offshore and central American workers for 1/4 of the wage of U.S. workers. Perot was right. That sucking noise, remember?
YOU are so right!! Obama's Chief of Staff RAHM EMANUEL was Bill Clinton's point man ramrodding NAFTA AND a retroactive tax increase thru a Democratic Congress in 1993......and he bragged about it! No Jobs........blame Democrats!
You can't return jobs when greedy corporate America has found a way to plunder offshore ...blah...blah...blah...
Sounds like the entitlement crowd has jumped billing on ZH.
So many here complain about the system being corrupt, yet what do they look to for retribution? Alas, the corrupt system.
Thank goodness no foreign companies offshore their labor in the U.S. (like Toyota, Sony, Siemens, Shell, National Grid, etc., etc., etc.).
Grow a pair, whinatic.
Foreign companies produce in the US because it is cheaper to do so. It is cheaper to do so usually because the US MAKES imported versions more expensive through tariffs and taxes
The 'free trade' mantra is simply an excuse to offshore as many jobs as possible. GATT NAFTA and all those other trade agreements DID lead to the 'great sucking sound' Perot talked about.
It's not about 'entitlements' - it's about a level playing field. Companies producing in China pollute the planet like mad (and those effects ARE felt all over not just in China). Their workers are paid far less, with little in the way of safety regulations or benefits.
Endless pursuit of the cheapest possible labor leads to serfdom for the majority while a very small few profit. Do you want to live in a neo-feudal oligarchy where citizens aere seen as disposable labor or a democratic society that values its citizens?
spot on analysis
"corporate greed" Yes, Apple should make their stuff here in America. Anyone wish to buy a $4,000 I-phone?
I don't want one for $35 either
So who's being greedy if the cost to make it is higher in America? Isn't that a problem of inflated wages?
BTW, I-phones are not necessities...
A $4,000 I-Phone would be too filling. BURP.
Hello. It is energy repricing the value of (insert nationality here) labor.
It's not corporate greed. It's intergenerational greed of all.
Eventually the future which you all seek to borrow from will become nonexistent. Sooner or later, that day will arrive.
http://economic-undertow.blogspot.com/2009/11/finance-deflation-or-energ...
There is no jobs crisis.
The BLS doesn't account for two rapidly growing sectors... bank robbery and prostitution.
The service economy is alive and well!
you mean wall street and washington DC bank robbery and prostitution? I think you are correct.
How do I reword my resume for those?
Just include something about proficiency in .40 SW, .45 ACP and been around the world.
It's technical jargon, but the recipients will understand.
It always helps to study the best.
http://en.wikipedia.org/wiki/Carl_Gugasian