The US Today: Economic Stagnation, Political Paralysis
The monthly employment report for September, released Friday, shows how far America remains from an economic recovery that might feel different from a recession to most of the public, nearly four years after the Great Recession began. Unemployment remained at 9.1% in the household survey. With a jump of 342,000 thousand additional people involuntarily working part-time, the labor department's broadest measure of unemployment (which includes these workers and others who have quit looking for work because they can't find it) rose to a near-record 16.5% of the labor force.
As my colleague Dean Baker pointed out, the 103,000 jobs gained in September brought the total jobs added over the last three months to just enough to keep pace with the growth of the labor force. If present trends continue, we are going to be looking at intolerably high levels of unemployment for years to come.
The distribution of unemployment is also breaking records for ugliness. Some 44.6% of the unemployed have been out of work for more than six months. This kind of long-term unemployment is unprecedented in the post second world war era, and it causes permanent damage, as many of the long-term unemployed never get jobs again. Their children suffer as well, with damage to their education.
No wonder people are taking to the streets, in a phenomenon not seen since the Great Depression: mass protests targeting economic policy. As in Europe, where the 15-M movement in Spain, the general strikes in Greece, and mass protests in other countries have attracted widespread popular support, the movement of "the 99%" targeting Wall Street is a response to the failure of our political class to do what is obviously necessary for even the immediate future. There is a chance, at least, that it will be joined by increasing numbers of "the 16.5%" (unemployed or underemployed); the "15.1%" (below the poverty line); and "the 88%" (of the labor force without union representation) – and all the other effectively disenfranchised Americans that make up the 99%.
It is a good sign that President Obama has shifted tactics and, instead of begging for crumbs from the Republican leadership, is now willing to say publicly that they will be held to account if they refuse to pass his proposed legislation that would reduce unemployment. However, his proposed jobs bill is too small to make much of a dent. Goldman Sachs, which represents "the 1%", noted that it would not even bother to change its forecast for growth next year, because even if Obama's proposal were enacted "in its entirety", it would only shift the effect of fiscal policy from a negative 1.1% of GDP to a positive 0.4%. Of course, this would still be a noticeable improvement, but Goldman Sachs is counting on the likelihood that much of it won't pass Congress.
More importantly, a positive overall stimulus of 0.4% from government – again, only if Obama's whole package were to become law – is pathetic in a time of such dire mass unemployment. One reason it is so small is that state and local governments have been tightening their budgets, shedding jobs since the recession began. This is a big drag on employment and growth. State and local governments have lost 259,000 jobs over the past year; in a time of normal growth, they would be adding that many jobs in a year.
To get us out of this hole, the federal government would have to do much more. That has been the problem from the beginning: even the main stimulus bill (the American Recovery and Reinvestment Act) that began in February of 2009 replaced only about one-eighth of the private spending that was lost as a result of the bursting of the real estate bubble. But as that stimulus ran out, employment gains petered out and the economy fell into its current state of stagnation.
For all of our political leaders' spectacular failure – the lack of leadership from the White House and the successful economic sabotage of the Republicans – we can give special thanks to the major media. With a handful of exceptions, they have been the great enablers throughout this malaise, lending credibility to ridiculous arguments that America is constrained by a "debt crisis". The federal government's net interest payments on our public debt are running at around 1.4% of GDP, about as low as they have been in the past 65 years.
We are now more than one third of the way through a "lost-decade", having barely caught up with our income at the end of 2007, when the recession began. Thank God there are people in the streets who understand that there is nothing inevitable about this misery. It is their strength and organisation that is currently our best hope for a better future.