Opinion

Felix Salmon

Jobs fail

By Felix Salmon
June 3, 2011

There’s no need to look beyond the headlines this month: both the jobs report and the unemployment numbers for May are telling the same grim story. A pathetic 54,000 new jobs were created last month — that’s significantly below the pace needed just to keep up with population growth — and unemployment went up, to a gruesome 9.1%.

Statistically speaking, both of these numbers are flat. But flat is, obviously, not remotely good enough in an economy where all stimulus — both fiscal and monetary — is coming to an end and where the single most important indicator of whether we’re successfully recovering from the Great Recession is in the employment figures.

If you do want to go beyond the headlines, things look if anything even worse: the average duration of unemployment, for instance, just hit another new record at 39.7 weeks; a full 44% of all unemployed people have now been jobless for more than six months. And on top of that, it turns out that the government’s statisticians were overly optimistic for the past couple of months: the payrolls numbers for March and April were revised downwards by 39,000 jobs.

We can’t even kid ourselves that these numbers are tornado-related: the Labor Department explicitly says that it has found “no clear impact of the disasters on the national employment and unemployment data for May.”

The only tiny possible chink of light here is that these numbers are so bad that they might persuade bickering politicians on Capitol Hill to stop playing stupid games with the debt ceiling and start concentrating on important matters. Oh, who am I kidding: we’re in election season now. Nothing is going to happen, in terms of remotely important legislation, until 2013, for risk that Obama might be able to take credit for it.

Which means that we’re back in the hands of Ben Bernanke and the Federal Reserve Board. As QE2 comes to an end, that’s not a comforting thought.

Comments
72 comments so far | RSS Comments RSS

Good article, Felix, Thank You.

Posted by Laster | Report as abusive
 

Sorry, Curmudgeon, that was a half-baked sentence. I meant that *price increases* for services will be restrained due to flat wages. The cost of borrowing, clearly, is tied to interest rates.

But as you say, I would expect less borrowing as people adjust to economic stagnation. Borrowing is a way to shift costs into a (hopefully rosier) future. When you are convinced that the future will be harder than the present, there is no incentive to borrow.

I do see a bit of risk-taking in search of higher bond yields, though individual investors seem to be pretty conservative still.

Posted by TFF | Report as abusive
 

Thank you Mr. Salmon for this clear article and as well as TTF, Curmudgeon as well.

Posted by FBreughel1 | Report as abusive
 

@racinrick, that you would see class envy in my post is ridiculous. Especially as there is none… I do not begrudge you yours. Your post had nothing to do with what I said or the URL I showed… and your remarks were uncalled for petty accusations. I happen to think most economists are as smart and all knowing as a tree stumps and do not read or follow Krugman.

I will repeat, trickle down economics is a farce. It didn’t worked in Reagan’s time, didn’t work with the tax credits (how many did you hire… show me the dates for bragging rights) as the GOP promised and never will.

@ TFF, exactly. The stock market is manipulated. The middle class are still in the dip and never did come out of the recession. Employment is the indicator that should be the focus of coming out of recession, not that banksers are back to giving bonuses…

The good old boys will happily ensure they are propped up with OPM. Who gives a crap about jobs when you are making money hand over fist? (The irony of GE boss being the jobs guy is like a poke in the eyeball) Or when you are bailed out? When you have tax credits up the wazoo? Especially not when you can take tax benefits and turn them into 2 for one specials in other countries.

Posted by hsvkitty | Report as abusive
 

Simply put, the U.S. economy is virtually toast, and if not for commodities such as oil and other natural resources, the Canadian economy as well. Canada exports 80% of their goods to the U.S., the two economies are tied at the hip. The stock market is NOT a good barometer anymore of where the REAL economy is headed, it’s subject to too much manipulation and “black magic” by the Feds and by the TBTF banks. There’s more transparency in a Vegas casino than in Wall Street these days.

We are now paying the price of short-sighted government policies over the past 30 (Reagan, Bush 1, Clinton, Bush 2, Obama) years which allowed the slow but steady destruction of the North American manufacturing base (approx. 46,000 factories have moved to China alone), those jobs will never come back. But the mega corporations are definitely benefiting from the globalization phenomena as evidenced by their surging profits. The financial sector is no doubt also a major beneficiary of these same policies during the past 3 decades.

Collectively, we have made this Faustian pact, wherein allow most countries (japan, China, et al) to manipulate their currencies vis-a-vis the U.S. dollar so they can buy U.S. Treasuries and thus enable Americans to keep consuming cheaply made products from abroad. The result is the slow destruction or thinning out of the American middle class. In just a short period of 50+ years, the American Dream has turned to the American Nightmare with no easy, painless solution on the horizon.

Posted by b.nimble | Report as abusive
 

@hsvkitty, your post did support class envy and blame… GE, etc…tickle down economics etc., or “A rising tide will raise all boats”…they did work. I’m sorry, but you are confusing trickle down with tax policy. In my view, nothing will work until the IRS is abolished and a simpler, easier to calculate code is initiated. Therein lies the source of the problem….people have virtually no control over tax rates. I highly advocate a national sales tax applicable to all…including corporate. The mentality has to be changed that what we earn is NOT partial to the government…that it is somewhat voluntary and elective….based on the goods bought. If I ruffled your feathers I do apologize, yet I see no need to back off from my earlier position, as your first question was “So you endorse tax cuts for the rich? You wish to end social benefits because you feel you are paying more then others and there should be no social nets?” If those aren’t geared to class envy, tell me what it.

Posted by racinrick | Report as abusive
 

I’m sorry to bother, but I just have to grumble. I can’t grumble to my lawmakers ’cause it is as if none of them have any common sense, nor any ears.
My local state rep is a typical example. He was recently quoted regarding his no vote for a state-cut-spending proposal as voting to satisfy “his own heart” and not what his constituents demanded. (He’s never received my vote, and now, will never receive my vote, for sure.)

So, who to grumble to after reading some distressing reports?
Bloomberg BusinessWeek recent edition, page 12, the reporter, Bob Ivry, must have painfully filed through some “29,000 pages of data the Fed was
forced to release under the Freedom of Information Act after a request for disclosure was fought all the way to the Supreme Court.”
Ivry found out that banks like Goldman Sachs, and Royal Bank of Scotland were borrowing money from the US Federal Reserve back in the pre-crash days and three months after the crash (for sure)
at ridiculous rates of near .01% and then turning around and buying 10-year Treasuries yielding as high as 4.27%! The banks were allowed to keep their profits
(our taxes)! All this was possible because of a secret lending program that is still pretty much secret called Single-Tranche Open-Market Operations.

THEN, last week Bloomberg wrote about Alabama Congressman
Bachus, who was pretty much seated in government by JP Morgan Chase’s contributions. He voted with the other GOP’s to stall the crash-correction proposal regulating derivatives while it was still in committee. Derivatives are still alive and well! Are
these banks able to continue with the loan program above, too, when they get sunk a tat-bit by their derivative gambling?

THEN, as if no one has noticed the struggling 9.1% unemployed that you mentioned, nor
the crawling and clawing to survive rest of the general population,(–because of the crash!): Next week, the fed government (more specifically, the democrat Durbin from soaring tax state, Illinois) is going
to propose a sales tax for the internet or The Main Street Fairness Act because governments are missing out on $10.1 billion dollars of tax this year and $11.3 billion in tax next year!

The governments need more money FOR THE
crooked, greedy BANKS!

Wake up Representatives! The American public is NOT
HAPPY one bit with the job you ALL are doing!
Don’t YOU even think ONCE about raising taxes until
you first think about how you can be stewardlyI’m sorry to bother, but I just have to grumble. I can’t grumble to
my lawmakers ’cause it is as if none of them have any common sense, nor
any ears. My local state rep is a typical example. He was recently quoted
regarding his no vote for a state-cut-spending proposal as
voting to satisfy his own heart and
not what his constitutents demanded. (He’s never received
my vote, and now, will never receive my vote, for sure.)

So, who to grumble to after reading some distressing reports?
Bloomberg BusinessWeek recent edition, page 12, the reporter,
Bob Ivry, must have painfully filed through some
“29,000 pages of data the Fed was
forced to release under the Freedom of Information Act after a
request for disclosure was fought all the way to the Supreme Court.”
Ivry found out that banks like GoldmanSachs, and Royal Bank
of Scotland were borrowing money from the US Federal Reserve
back in the pre-crash days and three months after the crash
at rediculous rates of near .01% and then turning around and
buying 10-year Treasuries yielding as high as 4.27%! The banks
were allowed to keep their profits! All this
was possible because of a secret lending program that is still
pretty much secret called Single-Tranche Open-Market Operations.

THEN, last week Bloomberg wrote about Alabama Congressman
Bachus, who was pretty much seated in government by JP Morgan
Chase’s contributions. He voted with the other GOP’s to stall
the crash-correction proposal regulating derivatives while it was
still in committee. Derivatives are still alive and well! Are
these banks able to continue with the loan program above, too, when
they get sunk a bit by their derivative gambling?

THEN, as if no one has noticed the struggling 9.1% unemployed
that you mentioned, nor
the crawling and clawing to survive rest of the general population,(–because
of the crash!): Next week, the fed government
(the democrat Durbin from soaring tax state Illinois) is going
to propose a sales tax for the internet or The Main Street Fairness Act
because governments are missing out on $10.1 billion dollars of tax
this year and $11.3 billion in tax next year!

The governments need more money FOR THE
crooked, greedy BANKS!

Wake up Representatives! The American public is NOT
HAPPY one bit with the job you ALL are doing!
Don’t YOU even think ONCE about raising taxes until
you first think about how you can be stewardly with the taxes that you are already getting!

Posted by limapie | Report as abusive
 

Curmudgeon,

I’m a mom. For the last three years I’ve been watching our best and brightest high school grads look for jobs, go off to some of the best Universities in the country, come back looking for jobs; and for more than a year now, donate their time to non-profits and businesses. Having done the same myself as a new grad, it is painfully obvious, though I’m not discouraging them, that there are no jobs now, or in the future for the majority of people graduating in this generation. The most successful grads have gone overseas to teach English and been asked to stay by their host country.

They’re coming home, but to what? Japan’s lost generation is happening right now, right here. There has never been a recovery, we’re in what I call “Obama’s Great Depression.”

Initiative? They have it now, but they are going to get discouraged, and beaten down when they’re still working for nothing in five years, or ten years. Some of them are taking on graduate school debt, but the reality is there are not going to be jobs for them either. Obama is looking forward to these outcomes, and anticipating a grateful, low-paid government bureaucrat, union-intimidated workforce whose dues sustain a one-party government.

I despise what has been done to this nation by government greed, banking greed, and personal greed. I see the only solution to this mess to be massive cuts in government spending and tax cuts for those who create private sector jobs.

This is the ‘correction’ that we’ve known would eventually happen; the reduction in wages so our manufacturing can once again be competitive internationally, so that companies can afford to local here. Whose responsible for a culture of ratcheting up wages, benefits, and retirement? For sixty years, the unions have raised the bar destructively for all employees, demanding more, and more until the public and private sector burden for retirement and healthcare are unsustainable. It’s not ‘something has got to give’; it’s everything is giving ‘way, crumbling under the weight of it.

Go ahead Congress, create a national tax on the internet, and people will stop spending their money there, too. Raise local and state taxes, and people will move or shop across state lines. Until Obama abandons his ideology (which will be when hell freezes over), or the elections sweep the rest of the deadwood out of Washington, we don’t have a future out here in the real world.

Everyone in America needs a national strike to get their attention. Then we need to flood Congress with demands for drastic spending cuts, a flat tax, sweep the job-killing regulations out the door, the elimination of government banking and loans, and banning derivatives. Then we as a nation can start crawling and clawing our way out of Obama’s Great Depression, and sixty years of failed policy, federal taxation and legislation, and greed. We can start small businesses without burdensome government regulations. We can buy our neighbors goods and services. We can see a time when our kids will move out of the house, and have a life, liberty, and acquire a few of their dreams.

Posted by MMM1954 | Report as abusive
 

MMM1954: Nice post.

“…or the elections sweep the rest of the deadwood out of Washington, we don’t have a future out here in the real world.”
But when has that ever happened? The election tide just washes up a different batch of deadwood.

Posted by aquacalc | Report as abusive
 

@racinrick… Not at all. The GOP insisted that the tax cuts for the rich would create jobs… so I repeat, how is that working so far?

You confuse my concern for others and the economy as individual concern or envy. I am not angry at all. I just refuse to allow you to label me as such. What you have to come to terms with is the class struggles you speak of will be a huge problem if not dealt with… as people lose their homes, jobs and have lass purchase power. Whether you presently have 28 people employed or not… the jobless rate still should be your concern.

Envy will be your enemy if you are part of the problem and not the solution. If one segment of the population is suppressed while the other flourishes, that is the fodder for revolution.

You want tax rates to be voluntary and elective? That is much like the banks wishing to police themselves… and do look where that brought your country. I live in a country where everyone is taxed because everyone benefits.

Greed has already changed your country into a plutocracy. You would do well to read this well written article if you are concerned about class struggles and envy…

http://www.theatlantic.com/magazine/prin t/2011/01/the-rise-of-the-new-global-eli te/8343/

Posted by hsvkitty | Report as abusive
 

Sorry MMM1954, but I couldn’t read past… “Obama’s Great Depression.” Seems you aren’t really paying attention to your own economy and what caused it, but put the blame on one person.

May I remind you Bush’s 8 years were some of your country’s worst and the GOP filibuster’s have made records. Although Obama’s Presidency has been a disappointment, you need to read more about what he actually accomplished and watch less FOX news…

Posted by hsvkitty | Report as abusive
 

To a first approximation, there is no difference between the Democrats and the Republicans. Their economic policies are almost identical.

We’ve been building to this disaster for many years. Reagan/Bush/Clinton gave us 20 straight years of economic boom, but they did so by feeding Wall Street on a steady diet of debt, lower taxes, lower interest rates, and reduced regulation.

Eventually booms end in crashes — but when we STARTED to have a crash in 2000/2001, Bush II redoubled efforts to keep the Wall Street engine chugging. After all, those tools had produced 20 years of boom, so why not see if we can’t keep it going a while longer?

The crash we are seeing now is twice as bad as it needed to be — and we haven’t yet hit the bottom.

Posted by TFF | Report as abusive
 

@hsvkitty: We can agree on one thing, and that is your point regarding plutocracy….it’s already here, and I am aware of it. That is why the tax policy suggestion I made will never pass…because it would be somewhat flexible. Your suggestion of “banks policing themselves” is hardly relevant. Envy is already the problem…everything I have is subjected to taxes because of envy of my success.

Posted by racinrick | Report as abusive
 

When you tax, tax, tax those who succeed (i.e., punish those folks for success), then pile on a horrid unfathomable mess called Obamacare, then talk about making the “rich” pay more taxes (under the guise of “their fair share”) do you really expect those folks to be motivated to expand their businesses and hire more people? For years the unending labor union demands for more and more and more, coupled with the gradual intrusion of government regulations and increasing taxes have encouraged any forward-thinking businessman who could afford to do so to take his business out of country. To make this a recovery where jobs are actually increased (1) incentivise businesses to return to the US by tax forgiveness, temporary deferral or reduction, (2) create a guest worker program to help the illegal alien problem and provide employment for personnel on the lower end of the pay scale, (3) stop looking at American businesses and their owners as national ATM’s. It won’t take 10 years; just a politician who believes in Capitalism.

Posted by Harleyguy | Report as abusive
 

I am really disappointed. I just read every one of the posts in this spool (again) and, with the exception of the quality of spelling, sentence structure and lack of profanity, the quality of input here is no better than any you see on stories about religion, abortion, or any thing else. It doesn’t take a very intelligent person to look at something that’s broken and recognize there’s a problem and, usually, identify what caused the problem. BUT. It is significant and noteworthy to see someone suggest a viable fix for the problem. How about you educated folks quit the whines, the fingerpointing and the revisionist history and make a substantive effort to find a problem?

Posted by Harleyguy | Report as abusive
 

ADDENDUM to 10:06 AM EDT note: intended last sentence to say “…and make a substantive effore to find a solution to the problem”. Sorry for the oversight.

Posted by Harleyguy | Report as abusive
 

Harleyguy, my solution to the problem is the same as it was in 2000-2002. Bite the bullet, buckle down, and recognize that our global economic empire is fading. Retrain, retool, accept a little less material consumption for a while, and start working back towards self-sufficiency.

Instead we have another decade of college graduates who are good for nothing but marketing and sales. Who will invent and manufacture the products for them to market and sell? (And what do you expect to happen when you allow Wall Street to grow until it represents 25% of the S&P500 profits? Wall Street produces **NOTHING**.)

The answer is the same, but the problem (and thus the pain) is twice as bad today as it was a decade ago. Tough luck — that is usually what happens when you ignore serious problems.

Posted by TFF | Report as abusive
 

Corporations are sitting on mountains of cash and are making record profits. CEOs make 24% more in 2010 than in 2009, and on average make $9M/year. But is this “capitalism”? Outsourcing continues unabated, which means that unemployment/underemployment will never go down. Why should it? In this vicious dog-eat-dog society, there is no incentive to actually add to the payroll when you have what is effectively a slave-labor market. Both political parties have been adroit in dazzling the rubes and bumpkins with distractions while funneling every-greater pieces of the pie to the oligarchy. The only real solution is to eat the rich.

Posted by Quatermass | Report as abusive
 

@racinrick & @harleyguy

What America have you been living in the past decade?

The Great Recession began in 2007 (under Bush) and was a perfect storm of horror for the economy and our financial system…and the structural issues largely remain to this day. The only reason the economy has remained afloat has been stimulus spending…and when that goes away?…

This is in spite of record low taxes.

Taxation in America is the price we pay for our civilization. We’ve seen a huge drop in federal taxes over the past decade to the lowest level since before WWII and the corporate tax rate is the the same as it has been since 1986 when it was passed by Reagan and Co.

Yet in this decade we’ve had two wars, an expansion of government…TSA & ICE, etc. Medicare Part D and non-war military spending and you talk about income envy versus responsible revenue generation?

Please take the time to review the tax history from WWII forward for some perspective on where we are today. We have never been asked to pay less for our Democracy…and by the looks of it, we will see our civilization continue to decline…crumbling bridges, roads, cities, education, healthcare, retirement age financial stability…

People who make more have more to protect. If we go the way of many third world countries without a middle class, so too will go the security of those who fail to see why America’s brand of social welfare has proven successful in supporting the health of our democracy.

Without a middle class, America will cease to exist as we know it today…

Support the Tea Party/Neo-con-artist version of America, and this is exactly what you will get.

Posted by NobleKin | Report as abusive
 

hsvkitty, I am very familiar with our tax history. What you describe as “pay less” for democracy I see has high dollar rent and regulation. No more simple than that. Perhaps you would see things differently if you handed over 200K per year, watch it spent foolishly, knowing that that 200k would have made all the difference to grow without having to borrow again. Yes, I must borrow to pay my taxes. You obviously have never employed anyone, it is glaringly obvious. If and when you do, look me up then and I’ll give you some pointers. Whine all you want about how we need the social programs so badly….for the same people who pay no taxes. You need to educate yourself who does pay taxes, and realize that it is voluntary to a degree…producers can then decide if they want to be hoarders or producers…read the papers…Hiring on strike ring a bell?..the extapolative result? That’s when you will have the mass turmoil you rave about. The problem with your line of thought is that you take for granted and assume those who produce jobs will always be there. Not ever having given anyone a job, it’s rather easy to assume it will go on and on.

@Noblekin: The Tea Party IS middle class. Where have you been?

Posted by racinrick | Report as abusive
 

MMM1954…how I enjoyed your posting. My two grandsons were college educated…one in Ivy League schools and the other in a Community College. Of the girls, one has her Master’s in Education and the other two just ‘plain’ college. I do not see it is an absolute necessity myself. There are NO jobs that will enable those kids (or their parents) to pay back the college tuitions in a manner that allows them to have anything but bare bones living conditions. I had a little college but was mostly self-taught and I made out a heck of a lot better than any of them financially. Acquacalc is right too. More dead wood being swept in with the tides of each election, whether local or national. This society seems to be turning into a clear example of Darwin’s postulation…the survival of the fittest and also the opportunists. And it certainly is a dog-eat-dog society, as Quatermass points out. Pathetic. Maybe we should bring our jobs back to the U.S. instead of outsourcing them to third world countries and trying to be everyone’s savior. Yes, we are our brothers’ keepers, but charity begins at home.

Posted by sophiewonderful | Report as abusive
 

Unemployment is well above 9.1

Posted by Dahc | Report as abusive
 

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