Sunday, July 19, 2009

What the hell does "jobless recovery" mean?

What exactly does a jobless recovery mean? Isn’t that an oxymoron like “military intelligence”?

The article by Louis Uchitelle in the Sunday NYT 7/19/09 Week in Review section with the exclamation capital letter headline, “When, Oh When, Will HELP Be WANTED”, asserts that we are entering a time of economic expansion; the worst is over; but where are the jobs? No expert economists this time are weighing in. Some mumble, no sooner than next summer, “a guess, verging on wishful thinking.” Seems that because jobs are shed monthly at ½ million of so (or as numbers crunchers would say, less bad than before) and people are in debt, the GDP which depends on 70% consumer consumption, will not revive very soon. Until it does, the manufacturing and construction sector will continue to lose employees. What’s supposed to happen and what has happened in the past is that after a recession ends pent-up demand is unleashed and the engines start roaring again.

However, history is no guide in this recession. It is the Mother of them all, at least since 1929.

The pent-up demand is not present—not with 6.46 million jobs gone in just 18 months and hundreds of billions of dollars in wages extinguished.
Credit is harder than ever to get for those who might want to spend again and there are fewer and fewer spenders.

Of course, since the last 10 years represented a fake expansion based on leverage (especially leverage enhanced by creative structure financial vehicles) and fee-based bullshit (credit rating agencies, bond issuers, mortgage originators all profited handsomely during the housing bubble), there is no pent-up demand. The only signs on the dim horizon are adding hours to the employees who’ve had their hours cut.

The estimates of job creation for the stimulus package (Mark Zandi, chief economist at Moody’s is 2.5 million jobs, not much considering we’ve already lost nearly 2 million jobs since the package was announced in February . Don’t forget that new people try to enter the workforce on a continuous basis (recent college graduates, new citizens, etc.), so the need for new jobs is greater than just making up the losses.

So what the hell are we going to do? Don’t depend on the politicians. Both Democrats and Republicans look upon a new stimulus as though it were radioactive, even if that may be the only thing to put ordinary people back on the rolls:

Such numbers suggest that if the goal is a job surge coming out of the current recession, then another stimulus package is needed, and a big one, perhaps as much as $1 trillion packed into a single year of spending, some economists say. Consumer spending and business investment provided such a kick coming out of steep recessions in the past.

But that’s not in the cards. No way. America worships money and ideology in whatever order. The politicians want to get re-elected and the powerful lobbyists in the FIRE (Finance/Insurance/Real Estate) sector want to write the laws for them, so we the common man/woman can only expect a trickle of jobs and a whole lot of belt-tightening, death by health insurance and untold misery. But do not fear: economists have found faith, not unlike my childhood faith in Tinkerbell’s resurrection:

There might even be a surprise, adds Robert Barbera, chief economist for the Investment Technology Group. “Some new and exciting area of job growth may emerge,” he said, “although I can’t guess where that may be.”

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