Friday, September 2, 2011

No Jobs Created - Go Figure...

Today's job numbers are out, and they suck. This seems to be a surprise only to those who are sufficiently motivated to avoid seeing this coming. Here's Andrew Leonard:
The number of involuntary part-time workers rose by 400,000. Worst of all, average weekly hours and weekly earnings both fell. Payroll growth numbers for June and July were revised downward, by a total of 58,000.

Cue the double dip recession warnings and get ready for another round of political recriminations and blame-slinging as we head into the Labor Day weekend.

Jobs report: A big fat zero
You won't find any "double dip recession warnings" here. We're in a depression. We have been in a depression since late 2007 or early 2008, depending how you look at such things. We're still in it. We will be in it for years to come, because nothing has been done to fix what is really wrong. There are going to be ups and downs. A few days ago, Paul Krugman wrote this on his blog concerning a Congressional Budget Office projection about the economy:
No, I don’t know where that recovery in 2015 is supposed to come from; my guess is that it’s basically the CBO unwilling to project a depressed economy more or less forever. But even with that bounceback assumed, the projection says that we’ll have a cumulative output gap of $5.1 trillion, with $2.8 trillion of that having already happened.

Five Trillion Dollars
Krugman doesn't see, even four years from now, that there is any reason to believe things are going to get back on track. Unless something unforeseen happens soon, he'll have no reason to, I fear. That means that more than seven years after it started, we will still be in what is essentially the same economic pickle we're in now. That, folks, is a depression. The Great Depression lasted from 1929 to 1941, twelve years. Of course, even by the CBO's optimistic prediction, that $ 5 trillion output gap translates to tens of millions of lost man-years of employment (see NOTE 1).

At Corrente Hugh explains why this crappy report was coming:
This is the first jobs report where we see unequivocally the effects of the economic slowdown that has been going on for the last two quarters. It should be a surprise to no one. Weekly unemployment insurance claims have been above 400,000 for some time now. The original Obama stimulus is done. Smaller stimulative measures were largely soaked up by commodities speculation which drove up the price of gas and groceries. And the new catch word in Washington is austerity. This is not about the economy grinding to a halt and the corporate parties responding by hitting the brakes. As the worsening disemployment figures show, this is more like we are already in reverse (recession) and our corporate owned politicians are hitting the gas.

BLS Jobs Report for August 2011: Recession is in the Air
Commodities speculation and other financial nonsense continue unabated. Workers are still out of work, and there are more of us looking for work. Robert Reich puts things in perspective:
The Bureau of Labor Statistics reports today no jobs were created in August. Zero. Nada.

Well, not quite. The strike at Verizon reduced the labor force by 45,000. Minnesota government employees returned to work, adding 22,000. So in reality, America added 23,000 jobs. Almost zero.

In reality, worse than zero. We need 125,000 a month merely to keep up with population growth. So the hole continues to deepen.

Since this Depression began at the end of 2007, America’s potential labor force – working-age people who want jobs – has grown by over 7 million. But since then the number of Americans with jobs has shrunk by more than 300,000.

The Zero Economy
Reich then goes on to puncture a hole in the latest in a long series of nonsensical pronouncements about what's wrong with the economy:
Republicans continue to claim businesses aren’t hiring because they’re uncertain about regulatory costs. Or they can’t find the skilled workers they need.

Baloney. If these were the reasons businesses weren’t hiring – and demand were growing – you’d expect companies to make more use of their current employees. The length of the average workweek would be increasing.

But the length of the average workweek has been dropping. In August it declined for the third month in a row, to 34.2 hours. That’s back to where it was at the start of the year – barely longer than what it was at its shortest point two years ago (33.7 hours in June 2009).

It’s demand, stupid.

The Zero Economy
There would also be more borrowing, but as Nouriel Roubini noted (NOTE 2) a couple of weeks ago, businesses haven't been doing that, either. They've been hoarding their cash, which is just what businesses should do when they aren't seeing more demand for their products, especially when they see bad things on the horizon. With high unemployment and consumer spending stagnant after a precipitous drop:
The reasons behind this are not hard to fathom. By exploiting a record credit bubble to borrow against an unprecedented property bubble, American consumers spent well beyond their means for many years. When both bubbles burst, over-extended US households had no choice but to cut back and rebuild their damaged balance sheets by paying down outsize debt burdens and rebuilding depleted savings.

Yet, on both counts, balance-sheet repair has only just begun. While household-sector debt was pruned to 115 percent of disposable personal income in early 2011 from the peak of 130 percent hit in 2007, it remains well in excess of the 75 percent average of the 1970-2000 period. And, while the personal saving rate rose to 5 percent of disposable income in the first half of 2011 from the rock-bottom 1.2 percent low hit in mid-2005, this is far short of the nearly 8 percent norm that prevailed during the last 30 years of the twentieth century.

Tough Times Loom Ahead For The American Consumer
There is nothing but bad as far as the eye can see.

Under those circumstances, President Obama can call for businesses to hire all he wants. They aren't going to do it, and for good reason. Publicly-held corporations are not charities; if the people who run a corporation start hiring and expanding production for no reason, their stockholders can sue them. If Obama, who trained as a lawyer, doesn't understand this, then he is an exceptionally obtuse human being.

As Paul Krugman put it today:
Too bad there weren’t any prominent economists warning that the obsession with short-term deficits was a terrible mistake, that austerity would undermine hopes of recovery. Oh, wait.

Fatal Distraction
What do I mean by that? Here's Nouriel Roubini's prescription for righting the economy:
The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.

Is Capitalism Doomed?
None of which is what any prominent politician in DC is discussing right now. Oh, wait, they're discussing fiscal discipline, but their idea of fiscal discipline, and anything you, I, Krugman, or Roubini might recognize as fiscal discipline are two entirely different concepts. Which explains why Roubini asked that question in the title of his article.

Depressions have their ups and downs. Check the GDP chart for the Great Depression. As Krugman wrote in an op-ed column for the New York Times more than a year ago:
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

The Third Depression
[link added]

When this many people are out of work for this long, all sorts of things start to go wrong with an economy. Factories and businesses will deteriorate, as will worker skills. The real strength or weakness of an economy is the people in it and the things they have created that will help them produce other things. The longer a depression continues unabated, the more those things will whither, and the harder it will be to get out.

We can't afford to have the parade of incompetents who now run things in the White House and Congress continue to be in charge.

NOTE 1: I assume that a man year requires roughly $100,000 of GDP. It's a rough guess, of course, but a fairly good one. See this link for a more detailed discussion.

NOTE 2:Near 2:15 in the video. He says a good many more ominous things later in that interview, including that he thinks there is at least a 50 percent chance that we will see another economic downturn in the next few months. I see no reason to disagree with him on that score.

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