Fully understanding economics is definitely above my pay grade, but I have plenty of company with that, including the best of our economists, the ones who are humble. So as another fallible observer of the American economy, I’ll try to make a little sense of three recent additions to our body of economic knowledge.
1. On June 2, we learned that the recent trend of creating approximately 175,000 private sector jobs in the American economy was broken when the Bureau of Labor Statistics reported only 54,000 new jobs in May. To put that in perspective, if one company, McDonald’s, had not hired 60,000 in May, we would have had negative job growth.
2. The Washington Post, with Bloomberg Business, reported a new study on where the jobs are four- and-a-half years after the recent (or current) recession began in December 2006.
3. Fareed Zakaria, a gentleman who has a remarkable ability to make sense of both foreign affairs and economics, has penned an article in TIME Magazine called, “The Future of Innovation: Can America Keep Pace?”
The United States seems to live in a duality of the 24-hour news cycle and the four-year presidential cycle. In the case of the poor job figures for May 2011, the emphasis turned to presidential politics. Had the political strength that Barack Obama had built since the beginning of last year’s Lame Duck session of Congress hit a bump on the road? Republican geniuses like Mitt “I Believe in America, and I’m Running for President” Romney asserted the America is “inches away from ceasing to be a free market economy.” Maybe he’s Kenyan, learned the metric system first, and has difficulty converting to the British system of measurement that is commonly used in the United States. He seems to be blind to the damage that Wall Street has done to the American economy. Their mischief ratcheted up when the government loosened the reins of oversight and allowed the financial moguls to drift so many miles further into unfettered capitalism that they had traveled well over the horizon and were no longer in sight.
The dip in employment growth may be caused by something as benign as inexplicable cycles, to structural problems that have been created with bi-partisan failure to consider jobs as the key issue facing Americans. Republicans continue to grasp the misbegotten idea that if the wealthy have more money, they will use it to hire more American workers. Their failure to do so is why the stock market is benefitting them by being close to pre-recession figures, where employment has plateaued at a level well below December 2006 figures. Since this recession began, five college classes have graduated, each facing a job market far more daunting that what existed when their parents entered the job market.
Upon taking office, President Barack Obama worked with Congress to fashion a $700 billion stimulus package. Assessments of it range from the utterly absurd position of many Republicans, “The stimulus has created no new jobs” to the timidity of most Democrats, “We cannot afford another stimulus.”
As Tulane Professor Melissa Harris-Perry stated, the stimulus was very effective when money went directly from the federal government to individual Americans. One of the prime examples was the “cash for clunkers” program, which provided real economic benefits to individuals who traded in gas-guzzling cars for newer, more fuel efficient ones. The stimulus has been ineffective when states such as Florida simply refuse the money out of some arcane principle, or when states take the money and embed it in their entrenched bureaucracies. What is needed is another stimulus, perhaps two, that have the federal government directly creating jobs, as was the case in Franklin Roosevelt’s “New Deal.”
The Washington Post with Bloomberg Business piece analyzes job changes in a variety of sectors since the recession began. Perhaps the sector that is truest to free-market capitalism is mining and logging, where employment has almost directly followed oil prices. There have also been increases in education and health service, but it is not clear whether the newly hired are truly teachers or medical practitioners, as opposed to bureaucrats. Manufacturing is way down and clearly will not recover without New Deal-type remedies. Jobs in construction are down nearly 30%, a reflection of our housing crisis and the lack of investment by businesses. Recovery will not occur without more engagement from the visible hand of government stimulus.
Fareed Zakaria is deeply concerned about America’s decline in innovation. He points out that a recent study of innovation in forty countries from the period of 1999 to 2009, the U.S. came in last. This is a far greater concern than month-by-month employment figures.
Let’s hope that the employment figures for June skyrocket. Whether they do or don’t, the bottom line remains, we have serious structural problems that are unlikely to be solved until we have dramatic action. George Bush showed with gratuitous tax cuts and two unnecessary wars that the federal government was big enough to create many of our current problems. Now is the time to show, as FDR did, that the federal government is the only entity big enough to solve these problems. As citizens, we must give the federal government that mandate.