The Jobless ‘Recovery’
It’s worth reading Monika Bauerlein and Clara Jeffery’s article at Mother Jones on the ‘great speed-up’. The looming possibility of a double-dip recession notwithstanding, the economic recovery so far has been decidedly lopsided. While corporate profits are up, the American workforce fared much worse. People on one end of the scale are working longer hours but aren’t seeing an increase in pay. On the other end, people are underemployed, working for part-time wages and no benefits, or unemployed and unable to find work.
And the American workforce has fared ever worse if you compare us to the workers of other industrialized nations:
The chart is from Mother Jones (they have more here).
Part of this is the recovery in the financial sector making an otherwise slow recovery look okay on paper. Banks may not be lending, but they’ve used the bailout to hoard cash while buying up smaller banks at an alarming rate. Finance sector profits are way up. This is bizarre. It’s like Apple’s profits being way up without selling any phones or computers or iPads.
The financial sector doesn’t tell the whole story any more than corporate greed tells the whole story. Something’s happening here…and what is ain’t exactly clear.
I also don’t think the increased productivity argument tells the whole story. I see the more-work and more-hours for same pay as symptomatic of a deeper problem. Employers are able to squeeze more from their employees because those employees have nowhere else to go. Meanwhile, employers are reluctant to hire because demand is down, and demand stays down because a lot of people are out of work and a lot more people are too uncertain about the economy to open their pocketbooks. Even if they could, a lot of the last decade was spent wracking up private debt, so we’re deep into a balance-sheet recession.
All of which is just a vicious cycle. The more uncertainty exists, the less likely businesses are going to be to start hiring. The less hiring we see, the more stubborn the unemployment numbers. Demand stays low, and people have a hard time fixing badly mangled balance sheets.
Meanwhile, we have some serious structural changes especially in construction and the housing and commercial real estate industries. This just adds to the demand problem.
To me, what all this adds up to is the need for more stimulus, public works projects, investment in infrastructure and printing lots and lots of money. Until we see some actual inflation, none of this is going to change. We can’t make more cuts or stop borrowing or slash benefits and expect to see the economy just magically recover. It doesn’t add up – not with all this uncertainty, not with diminished demand, not with a serious balance-sheet recession underway, and not on top of a major structural failure following one of the worst bubbles in decades.
I say long-term fiscal adjustments to get long-term deficits in line (maybe an unbalanced budget amendment?) coupled with looser monetary policy and more stimulus spending. The only way we’ll see the economy speed up and not just workers either working way too much for the same pay or not enough (or not at all) is to be proactive. Which, I realize, is totally unlikely.