Jobs fail

By Felix Salmon
June 3, 2011
jobs report and the unemployment numbers for May are telling the same grim story.

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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.


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Well said.

Posted by MV53 | Report as abusive

There’s been ongoing debate for a couple of years on whether unemployment was cyclical or the result of skills mismatch. It looked like cyclical was winning, but this data definitely supports skills mismatch.

Posted by Curmudgeon | Report as abusive

‘…for risk that Obama might be able to take credit for it.’

Guy’s been in power since early 2009, most of that time with a Democratic congress, yet the economy still chews. I’d say he’s wearing it.

Posted by Elektrobahn | Report as abusive

I’m 53 and except for military service have NEVER had a fulltime job in America. I have an associates, Bachelors and Masters degree and 30 years experience and cannot even find work washing windows, scrubbing toilets or emptying horse stalls. Growing up in Ohio I could not find work except in a carwash at $4.30 an hour. I did part time stints as dishwasher, janitor, busboy, burger flipper and general laborer — that one paid $6.90 an hour with no benefits. I have my pension and disability and am now confident my days in the labor pool are finished — it will be a leisurely strole up towards early social security collection and a rocking chair while I spend the remaining years of my life watching the U.S. go down the drain from the comfort of my back porch and IPAD ver 43. Teenagers in America are facing a dismal future of pain and taxes and little opportunity unless you can invent something no-one else has thought of — or work your way into Investment Banking where you devise new and insidious methods to rip off clients, enrich your own accounts and generally concoct exoctic and unknown financial instruments confuse, confound and hijack money from unsuspecting clients who should be buying T-bills and stock index funds. As I smoke this cigar and sip a bourbon on the rocks, I’ll shed a tear for the America I knew in my youth — a world of pensions and good paying factory jobs and hard working unionized car workers who raised families on the line — and now its all gone — sold to the China Man at ten cents on the dollar or to the Corporate God CEO from an Ivy League pigstye making $87 million a year and stock options, a corporate jet and $12,000 suits who never got his fingernails dirty scrubbing hubcaps in a carwash at 20 below zero in the winter.

Posted by cyanidenowpls | Report as abusive

When we were seeing such numbers during Bush’s two terms we were being told we were in a “Bush Boom: the best story never told.” lol…the “Bush Boom” that averaged about 3500 jobs per month leaving us with a hole of about (150000-3500)*96 jobs in addition to the jobs lost since ’07.

Now that we’re reaping what Bush and his gang sowed we’re blaming anyone except those who put us in this position to begin with.

Has anyone ever stopped to consider that what happened in ’01-’09 broke this country for good ?

Posted by InHellsKitchen | Report as abusive

Globalization and free trade have forced this country to climb the value chain without necessarily having the correct educational and vocational infrastructure to do it. Especially now when you consider that the legions of unemployed have been languishing out of the workforce for a substantial period of time, structurally high unemployment will likely be here for the foreseeable future.

This country needs more high-tech workers and engineers; trying to revive manufacturing as the lynchpin of the economy is a pipe dream, but there are plenty knowledge work employers that can’t find enough competent employees (e.g. Java programmers). Hopefully the higher salaries this scarcity creates will dissuade young people from trying to be the next Gordon Gekko and actually acquire 21st century skills.

Posted by richardcm | Report as abusive

Participation rate was up slightly, which makes employment as a percentage of the eligible pool even more “statistically flat”. Weekly wages are up at about a 3 to 4 percent annual rate.

I’m not saying it’s pretty, but these were the silver linings that popped out at me.

And, of course, much of Washington, Congress and the President both, continue to put forth policy that they believe will help the economy. Of course, they disagree on what will help the economy, but I’m not sure additional seriousness is what’s going to make a difference.

Posted by dWj | Report as abusive

I’d say that this is business making a statement on what they think of the Republican Congresses ideas… one month doesn’t make a trend but if next month comes in way low again then I think the verdict is in and the TPers are cooked.

Posted by CDN_Rebel | Report as abusive


According to your overlord, Peter Peterson, the debt is the largest problem facing the country. Stop talking about silly jobs which only help the lower classes.

I’m still waiting for you to square your deficit hysteria with your desire for job growth. They are mutually exclusive.

Posted by petertemplar | Report as abusive

HosedInAmerica said: “All young people see these days are the high tech and and engineering jobs going to Asia.”

I don’t know about that. I’m 30 and work as a computer programmer in a depressed city (Cleveland). I am currently quite happily employed but I know that if that were to change, there is no lack of opportunities in IT even in this city. We recently let go about 12 contractors in order to replace them with full time employees and I know that just about all of them had found employment elsewhere within a month. Whenever I put my resume out on Monster or Dice to see what the environment is like, I’m usually bombarded with calls and emails. I know this is all anecdotal but in my experience, high tech (in this case computer programming) is actually lacking the labor supply to meet demand.

Now that said, not everyone is suited for high tech. I agree with you that it is a pipe dream to expect 9 million manufacturing workers to transition into technical fields. If everyone could be a nuclear physicist, then they would be because it pays better.

Posted by spectre855 | Report as abusive

It will be interesting to see how much longer the Administration continues down the path it has chosen before it realizes that the Government does not create jobs, but rather the private sector creates real, meaningful and long-term jobs. But wait! The Administration CANNOT change paths because that would mean they were wrong and ego will not permit that. And yet the long-term answer is so apparent: government must simply introduce stability in the workplace. But wait!! The mantra of this Administration is: Now is the time for change. How’s that working out for ya?

Posted by overthehill2009 | Report as abusive

Re: It’s Obama’s fault. Yes it is. It is also the fault of the Republican Party. It is also the fault of the American voter who consistently votes for either the Republicans or the Democrats, and does so without demanding any accountability from either party. If, perhaps they decided on a whim, to vote for anybody, anything, other than a Republican or Democrats (Tea Party doesn’t count because they are just Republican stooges) then perhaps we could get some adults to make real, and difficult, decisions. But nope, there’s a new season of American Idiot, err, Idol, on the tube, and we care more about who’s dancing with the stars than who’s governing us.

Posted by OnkelBob | Report as abusive

Two Comments:
1. Salmon, this is an uncharacteristically sad post for you. Have you lost your sanguinity?
2. cyanidenowpls has left us with a piece of literature. Real literature. Thank you sir, enjoy your descent.

Posted by Metroplouston | Report as abusive

These comments go a long way towards explaining the problem: people can’t tell who it is that’s screwing them. Here’s a hint: if it were up to Obama and (most of) the Democrats, we’d probably be looking at a second (or is it third, now?) stimulus. Deficit reduction and cuts to government spending (i.e., job cuts) almost certainly wouldn’t be front and center.

But instead everyone says, “Oh man, this hasn’t turned out as well as I’d hoped. Guess I should try voting for the other guy.”

Posted by WHS | Report as abusive

Obama is an amateur who should have no hope of winning in 2012. He’s been exposed, and has no clue on the economy. He is still doing more damage and not creating any jobs. The continued uncertainty, along with a refusal to exploit any domestic energy sources will keep us in a tailspin until after November 2012.  /7824656/uncertainty_and_its_effect_on_ the_economy.html?cat=9

Posted by greg_schmidt67 | Report as abusive

“I can only hope that when the riots begin these former workers seek out the “Free Trade” academics, politicians and corporate hacks who put them out of work and burn their houses down…”

Are you serious, HosedInAmerica?

Does the word “incitement” mean anything to you?

Posted by ProFreeTrade | Report as abusive


Does the phrase “social contract” and do the words “dereliction” and “treason” mean anything to you?

If you’re worried about the risk of incitement, maybe that’s an indication that the policies you advocate aren’t working, and that people are rightfully angry.

Posted by Dollared | Report as abusive


Does the phrase “social contract” and do the words “dereliction” and “treason” mean anything to you?

If you’re worried about the risk of incitement, maybe that’s an indication that the policies you advocate aren’t working, and that people are rightfully angry.

Posted by Dollared | Report as abusive

@Greg Schmidt, the only source of uncertainty is a nihilist Republican Party and it’s cynical and shadowy funders and directors.

Obama has been clear that aggressive use of Keynesian tools and aggressive control of health care costs is his first choice. These are both proven tools that would have helped our country immensely. But because the Koch Brothers and the private equity guys want to keep their low rate of regulation and their Bush tax cuts, they are driving this game of chicken with the well-being of billions of people at risk. And why do you support them?

Posted by Dollared | Report as abusive

Before anyone can solve the problem, you have to take ownership of the problem.
Republicans are refusing to own up to their part in this. Anyone who is blaming the job issues on Obama needs to wake up to reality. Before we had a Republican controlled house we had a Democratic majority in the house, and the Republicans blocked most of the important legislation from ever getting passed.
Then they turned around and blamed Obama for not passing legislation? (He’s the President, not congress, and they were the ones standing in the way in the first place.)
Now we have a Republican controlled congress, and the best idea they can come up with is to shutdown Medicare and abolish unions. Can somebody tell me how any of that will create jobs.

They were out to lunch when they caused the problem in the first place, and they are still out to lunch.

As long as Republicans are saying it’s “it’s the other guy’s fault”, they are part of the problem.

I want to hear our politicians start saying, “I’m sorry I messed up. Now I’m seriously going to do something constructive.”

Posted by dmetzler | Report as abusive

Why doesn’t this article talk about the real cause of America’s problems instead of dancing around the issues.
The government does not point guns at corporations and say go hire Chinese workers. They don’t tell computer manufacturers to go buy parts from Taiwan.

They don’t tell YOU to go buy goods made in foreign countries. The real problem is you think clothes made in China are better because the $ on the price tag is lower.

Government doesn’t tell YOU to go elect the guy that assaults the free market system by stripping it of any rules of fair play, (regulation).

They don’t tell YOU to go watch FOX news, and pretend that it’s fair and balanced, or that it’s even based on any facts at all.

They don’t tell YOU to go watch MSNBC and take opinion as fact.

They don’t tell YOU to demonize at every turn the currently elected politician just because the person you wanted didn’t win.

No the problem is not just in Washington. The problem is in the mirror staring back at you. If you really want things to get better, then stop being a part of the problem.

1) Go start a business, and hire Americans to do some work.
2) Boycott the Republican party until they get leaders who believe in honesty and fair play.
3) When somebody from the other party gets elected, support him or her above your party. (America first)
4) Plant a garden, and grow some veggies. Share some with your neighbors.
5) If you’re Republican, admit that America needs safety nets like Medicare and Social Security, and acknowledge that the free market system is a system that has rules and regulations. Without rules there is no free market. Without rules and regulations, it’s just a bunch of players trying to swindle each other. (That is not a free market.)
6) Buy American unless you worry about unemployment in China. In that case, by all means buy goods made in China. Otherwise stop complaining.
7) Next time some politician says he gives Obama a failing grade for the economy or whatever, tell him you are here to see his report card; not Obama’s. If he starts spewing out Trickle Down Economics BS, then walk away. If you want to see Obama’s report card, go talk to Obama, not FOX News.
8) Be more active in monitoring the issues and the actions of politicians. (You wouldn’t have to go ask for report cards if you stay on top of what’s going on.)
9) If you aren’t working, go find a job. Either start your own business, work for somebody else, or at least do some volunteer work. If you can move, and you can communicate, there is no excuse for being a loafer.
10) Next time you see someone draping himself or herself in the flag, and questioning the Americanness of the President of the United States, walk up there and tell them that the title of Patriot is not self-proclaimed. It is not a club they can boot people out of, or buy their way into. It is earned by putting your country first, not in talk, but in deed.

Posted by dmetzler | Report as abusive

I would be more opposed to re-electing Obama if the Republicans had any sort of coherent economic plan. Alas, they do not. pdf

(or, if the big pictures scare you – SUMMARY.pdf)

It’s as if they took the same document from Bush’s re-election campaign and added a youtube video (except they added something about the deficit, because they care about that now).

ARRA was pretty close to as centrist as you can get (within the realm of politics) for a stimulus (1/3 tax cuts, 1/3 keynes, 1/3 welfare).

Posted by djiddish98 | Report as abusive

Who’s to blame ? Here’s who’s to blame: “Independent analyses have shown that more than half of the $14.3 trillion debt is from policies enacted during the past decade when Republicans controlled both the White House and Congress, and much of the rest from lost revenues and stimulus spending and tax cuts since Mr. Obama took office at the height of the financial crisis and recession.”

And the GOP crooks who oversaw this descend into the debt hole are still in Congress playing the “fiscal conservative” con job.

Posted by InHellsKitchen | Report as abusive

What do you suggest Felix?

An actual solution would have been to work on the long term fiscal situation in a way that allows for short term stimulus. Instead, we got the largest new entitlement in history *after* the financial crisis and mere political opportunism when sincere attempts are made to address the long run fisc.

Present “Keynesian” solutions would have been unrecognizable to the man himself. Actual Keynesianism means government countermovements to the business cycle amid structural fiscal stability. If you enact short term stimulus amid gross structural deficits you are firmly in the Zimbabwe economic school.

This is no Great Depression situation. Then, there was massive deflation, the dollar was way too strong, commodities all crashed. Today, things are opposite and there isn’t the room for stimulus that there was then. The dollar is weaker, commodities including oil and many others are at the roof. Inflation is not negative but firmly positive. Additional stimulus is therefore as likely to hurt as to help. Gas is at $4 per gallon, food prices are up and Walmart is already warning about inflation in the pipeline, based on their international supply chain.

But you know all this already, don’t you?

If America addressed the long-run fisc many advantages could accrue. Investment, which has been fleeing our shores could return. Business and personal confidence would return, gas and food prices would come down and yes, there would be scope for short-term Keynesianism. Best of all would be a return of optimism in America’s (and the world’s) future that would unleash all manner of other intangibles.

Posted by DanHess | Report as abusive


Who are you to impose your will upon others on who they decide to trade with? Secondly, who is worth more as a human being, you or person in India/China that are “stealing” your job? Do they have a human right to improve their standard of living, or should they live in poverty until the sun explodes? This is a question of morality, not politics.

Posted by Matt-Chicago | Report as abusive

yeah, nothing will happen “for risk that obama will take credit for it.” lol. he’s already done PLENTY.

we tried the “stimulus” strategy. didn’t work. the recovery was underway (according to the experts) before ANY of the “shovel ready” “timely and targeted” stimulus was expended. we were told that the stimulus would keep unemployment below 8 percent. a year after “recovery summer” unemployment is now 9.1 percent and rising and the labor participation rate has steadily declined.

somehow, spending all that money, adding trillions to the national debt, creating a massive new entitlement program, adopting a new regulatory scheme … made things worse.

obama isn’t eager to take the lead anyway. he never is. he’ll just let the republicans act (on medicare, for example) so that he can go on the attack. he has NO IDEAS, no plan for dealing with the national debt, massive unemployment, or any of other ills.

Posted by jondaly | Report as abusive

Obama told us if we just let him pass the massive corrupt stimulous bill UNEMPLOYMENT wouldn’t go over 8%! UNEMPLOYMENT went over 10% and now after trillions and trillion and trillion in wasted spending with borrowed dollars UNEMPLOYMENT is over 9% again and going back up. What has Obama given us with his extreme left wing agenda? Massive wasted corrupt spending! Mountains of debt that threaten to crush us. 9.1% UNEMPLOYMENT and going higher. A new useless, endless, unauthorized war against a nation that was no threat to us. The massive corrupt spending, the debt, Obamacare, the war. Its all a massive failure. Obama’s extreme left wing ideology has failed miserably. Obama has done so much damage it will take decades to get our nation out of this decline. We need to get the corrupt spending and debt under control and start digging out. So far Obama is just making it worse! Far worse. He has overtaken Jimmy Carter as the worst President in at least 100 years!

Posted by valwayne | Report as abusive

Automation, computers, internet business, exporting jobs and unrealistic shareholder expectations/downsizing is doing in jobs faster than we can hope to create them! Makes the case for deep spending cuts and modest tax increases-this is the new normal! Call it a generation of deflation for those living miles above the rest of the planet and miles above their means with monster government and little will to change until it’s a full blown crisis! Vote for anyone that’ll cut government spending or pay dearly and soon-it’s our only prayer,ugly, but our only prayer!

Posted by DrJJJJ | Report as abusive

Note: Do your homework, democratic congress for most of the last 10 years folks FYI! Also, it’s not who’s to blame now (both parties), but can we find the will to balance a budget some day somewhere in the US, if not kiss your quality of life goodbye period!

Posted by DrJJJJ | Report as abusive

I dismiss all the antiRepublican rhetoric easily. I ask two questions of those who think Obama and the Demos plan is working. Where is their plan? Where is their budget?…………………………I’m waiting……………………………………….still waiting…………………………..MMMH….Mum.

Posted by racinrick | Report as abusive

@DrJJJJ Republican congress from 95-07, democratic congress from 07-11 (ie only during the crisis and immediate aftermath), republican congress now… I’d call that mostly republican congress. Frankly I don’t care who takes responsibility for it, I just want both sides to do something to work together. Democrats say ‘let’s talk about it’ Republicans say ‘our way or the highway’… who’s leading for progress there?

Posted by CDN_Rebel | Report as abusive

Unfortunately, we are stuck with a president who does not have a clue. No clue on how to fix the economy. No clue about foreign relations. Just totally clueless.

Posted by dfox7 | Report as abusive

@racinrick They do have a plan actually: rollback the Bush tax cuts on all, institute a 30% inheritance tax (instead of 0% now) – that’S the revenue side. The cuts look at revamping healthcare in America so that Medicare/aid doesn’t cause such a burden on the public dole. Also military budget would be slashed by 20% with a 3yr freeze on new projects. As well, a new plan to help calm social security costs (but nothing really solid on that one, just vague talk since the problem really is 30yrs away yet). The breaks come in the form of subsidies to ANY company doing R&D on new energy that can be plugged into the energy grid or go in a gas tank.

That’s the plan, and they’ve stated it many times before. All the Republicans say is end social benefit program for the poor and slash taxes for the rich. Which plan sounds more sensible to you for America, mind you not necessarily making your wallet happiest.

Posted by CDN_Rebel | Report as abusive

@racinrick, There is an Obama budget plan and a Congressional Progressive Caucus People’s Budget plan. Try the Google some time. Then get back to us and give us your critique.

Posted by Dollared | Report as abusive

@overthehill2009, how is that trickle down working? With all those tax credits, loopholes, subsidies for the Corporations and rich who pay few or zero taxes… wasn’t that the point?

@dmetzler, thanks goodness… I thought most American had just pulled the wool over their eyes and were hoping for the best.

Posted by hsvkitty | Report as abusive

Hmmm…CDN_Rebel and Dollared. Maybe I need to look it up. But, in my conservative ways I probably just dismissed it as more unworkable rhetoric….the last plan I saw was the one in W. Cleon Skousen’s “The Naked Communist”. Ok, I did the Google thing and see where Paul Krugman endorses it…..another Koo koo Keynesian who thinks we’ll never run out of money. Don’t think that fits me.

Posted by racinrick | Report as abusive

@racinrick – so you say you can ignore Dems because they have no plan. then we show you a plan, endorsed by a Nobel Prize winning economist, and you say – you’ll ignore it? Can you act that stupid at your job?

Posted by Dollared | Report as abusive

What is stupid about it? I employ 28 people, what contribution to the Comrade state do you make?

Posted by racinrick | Report as abusive

@racinrick I weep for all 28 of them.

Posted by Ivan_Karamazov | Report as abusive

Government’s purposes is to provide services. Only by hiring people directly to provide these services can it create jobs. It can also hire people to dig holes fill them back in, but it does create jobs as the real, non-government economy does. Businesses making and or selling goods or services create jobs. ONLY people producing goods and services for sale are creating wealth. Government is a net consumer of wealth. It COSTS money to provide government services. The wealth to provide government services can ONLY be created by all the people working in the real economy.

To expect the government to ‘solve’ the unemployment issue is delusional. If the government wants see unemployment fall then it should step back and ALLOW the real, non-government wealth creaters (aka average citizens and businesses) to sort things out themselves. ANY government ‘help’ will only delay and retard the organic, ever-growing, self-correcting and self-healing process of a free economy.

The best remedy for unemployment and the economy as a whole: Obama and all 535 legislaters take a 2 year golf vacation.

Posted by BCanuck | Report as abusive

racinrick, your Comrade remark make you a lot less believable. 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?

How about closing loopholes, tax breaks and credits and benefits for the rich and Corporations and ensuring they pay the actual rates they complain about? 5/31/are-taxes-in-the-u-s-high-or-low/

Last year GE had a profit in the billions but paid no income taxes. Hmm with other benefits… could that mean they actually benefited as well? Yes it could, if you look at these 12 major corporations doing their part “comrade.”

Sometimes it is a big picture then your front door. Tax cuts are not going to get you out of the recession. But hey at least they are hiring !

(in other countries)

Posted by hsvkitty | Report as abusive


Agree with you 100%. We not only have structural problems in the US, we also have worker skill / training problems. I work in energy and my company is hiring. The last three hires? All have math or science degrees from state universities. It is very hard to find candidates with strong quantitative skills. My anecdotal evidence is that we as a country are producing too many liberal arts graduates who lack the kind of advanced problem solving and tool building skill the economy needs.

Posted by MattyS | Report as abusive

@hsvkitty. When someone praises an imbecile like Krugman, they just spilt their innards out. Why let somebody else do your thinking for you? That’s what he does isn’t it…does your thinking for you. Whether you believe it or not about my employees impresses me not one iota, but just remember I have more people on my payroll than does your Nobelist. You say tax cuts will not get us out of this mess….I assure you it will much more quickly than will tax increases. Want to see how many more jobs I could create if I wasn’t paying 200k a year in income taxes? Quit being so jealous of the wealth of others, that what gives you away as a comrade. Take your class envy somewhere else, it’s not needed and it’s really a hollow argument. Like trying to make oceanic waves with a tuning fork.

@Ivan_Karamazov: You shouldn’t. They all make more than you do. You should learn to surround yourself with good people and good things happen.

@BCanuck: Excellent post. You should have gotten the Nobel prize for economics:)

Posted by racinrick | Report as abusive


Excellent blog.
(My first time here.)
Many excellent and clear points on your part.
And in the comments, a really refreshing low density of vitriol. — Even the (Herbert) Hooverians seem to put some effort into delineating their views beyond just scorched-earth rhetoric.
What a difference from the comments sections of WSJ articles (superb journalism in the articles, but deluges of trailer trash mentality and ‘thought’ processes in the comments sections).

Thanks very much.
Taden M.
Treetowne, MI (48105)

Posted by T-EN | Report as abusive

Obama just said he would start reviewing regulations to see if they can be made more business/job friendly.

Maybe start with the 3000 pages of new health care regulations which Pelosi said they would have to vote on before finding out what was in it.

Makes Palin look like a genius.

And then move on to the EPA which, under Obama’s direction, is trying to regulate Cap and Trade into existence by administrative fiat – even though Cap and Trade has been specifically turned down by congress TWICE.

CO2 regulation is intended to drive up the cost of oil, gas and coal energy to make noncompetitive green energy more competitive.

Never mind that the huge costs of this hair-brained scheme will hurt low and middle income Americans most (people who worry about monthly gas and electric bills and cannot afford $40,000 electric cars), and American businesses which will have an extra burden of increased energy costs to deal with. No problem. Just lay off more workers.

Posted by Parker1227 | Report as abusive

The intent of the current policies has nothing to do with job creation at all. It is designed to bring the country to the cliff and to go over the cliff. Once the country defaults and/or chaos starts, riots, near anarchy etc., etc., you will see Obama and his gang step in and say they have to suspend the Constitution to save the country. Once done, there will be no blocking the communist/socialist dictatorship that is the real goal. But first…they will take away all the guns…they do not believe in the 2nd Amendment..the guns have to be taken away first. Look for this to happen.

Posted by Buglike | Report as abusive

“It looked like cyclical was winning,”

Really? When? If the unemployed/underemployed dipped below 15% at any point, I missed it.

We’ve seen massive stimulus efforts for three years now. Trillion-plus dollar deficits, extended unemployment benefits, multiple rounds of quantitative easing, and historically low interest rates. None of that has had appreciable effect.

What is the definition of “liquidity trap”? Could it be described as a situation in which the outlook is so bleak that there is NO (risk-adjusted) profitable use for capital? Isn’t that what we’re seeing?

Possibly a massive direct-hire jobs creation program could get things started again? I don’t see political will for that, however, and we might run into debt trouble if we tried. Moreover, that approach is treating it strictly as a cyclical problem.

If we are truly facing a structural problem, then there are two alternatives:
(1) Retraining and education focusing on skills that CAN profitably be employed.
(2) Massive wealth destruction. Devalue the currency until our work force is competitive on the global scene. Accept the resulting lower standard of living as brutal fact.

My bet is on the latter, though motivated individuals can perhaps buck the trend through the former. Am giving time this summer to work with a few such students. Whatever jobs are available will go to them first.

Posted by TFF | Report as abusive

@TFF, sorry, perhaps I should have said that cyclical was winning the PR battle. Everything I have read over the last year assumed that jobs were coming back as they always had, and the skills mismatch argument seemed to have just about disappeared. It seems like it’s time to dust it off again.

Your (2) seems plausible, but politically dubious. It will take years (a decade or more?) to see unemployment drop to reasonable levels, and it will give the appearance of politicians not doing anything (kind of like we have right now).

Posted by Curmudgeon | Report as abusive

Curmudgeon, I think people have been placing too much faith in the stock market as a barometer of the economy. They fail to recognize that a rising stock market is not always a sign of increasing profits — it can also signal decreased expectations for return. When 10-year bonds have a near-zero real return expectation (possibly negative?), there aren’t many alternatives to park the cash that the Fed is passing around.

I obviously prefer my first alternative, but it depends on individual effort and individual initiative. There is always more that the government could do to help, but we don’t truly lack for opportunity. And too many students still aren’t awake to the reality of today — there are decent jobs available for only half the high school graduates. You have to find some way to distinguish yourself if you want to land one of them.

The second alternative isn’t quite as bad as it may sound, because as a nation we are capable of self-sufficiency. A falling dollar might spell the end of our economic empire (US-based multinationals might thrive but only a small portion of that will trickle down to the people), but we can learn to live with less. Most of our national spending is dominated by services and borrowing — and with flat wages and low interest rates, those will ultimately be restrained.

Posted by TFF | Report as abusive

@TFF, I agree on the education/training part, too. But there’s a cultural shift that has to take place. Forty years ago my father was laid off from the steel mill frequently, and always called back (until he wasn’t). There is still the culture in some industries that you leave your fortune in the hands of The Man, rather than taking control of your own life and learning and applying new skills.

Good points about the second alternative. As I think a recent discussion here noted, you really don’t feel poor unless you travel internationally and deal with exchange rates (3 times to Europe this year for me, so I see it). If you mean restrained financial services, that’s an interesting perspective. I wonder if it might open the door for more risk-taking to produce ephemeral growth and profit.

Posted by Curmudgeon | Report as abusive

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


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… 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