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WHAT WE THINK
No economic recovery for workers

August 8, 2003 | Page 3

"OUR ECONOMY is clearly moving in the right direction," Commerce Secretary Donald Evans declared last week.

Maybe the "right direction" for Corporate America. But for U.S. workers--still suffering through new rounds of layoffs, record long-term joblessness and falling real wages and benefits--it's hard to see any movement at all.

Wall Street's well-paid analysts celebrated last week after the Commerce Department reported that U.S. Gross Domestic Product (GDP)--the indicator of overall growth in the economy--increased at an annual rate of 2.4 percent from April to June, nearly twice as big an expansion as the preceding three months.

This was faster than economists had expected. But there are a number of factors involved that have to be recognized to get a clear picture of what's going on.

First, more than two-thirds of the GDP growth came from a massive increase in military spending because of the U.S. war on Iraq. The rise in military spending from April to June was the biggest for any three-month period since 1951, in the midst of the Korean War. Needless to say, the economic boost from war won't continue at the same level.

The statistics also showed an improvement in business investment. And a separate report claimed that the manufacturing sector of the economy expanded in July for almost the first time this year. But here, too, the results are mixed.

Most importantly, the growth that is taking place in the economy isn't nearly strong enough to turn around the factor that hits working people the hardest--unemployment. On the heels of the GDP statistics, a report from the Labor Department showed that the overall unemployment rate dropped in July--but only because half a million long-term jobless gave up trying to find work and simply vanished from the statistics. Meanwhile, total employment dropped again last month for the sixth month in a row, and manufacturing employment declined for the 36th straight month--with factories still working far from their capacity because of a glut of products.

How can the jobs picture remain so miserable, even though overall economic statistics are looking up? The short answer is that Corporate America is using the recession and unemployment to squeeze workers--to force existing employees to work harder and produce more.

Economists estimate that labor productivity--the measure of overall output per hour--increased by as much as double the rise in GDP from April to June. "That has very positive implications for the economy, but not the labor market," commented William Dudley, of the Wall Street firm Goldman Sachs. What Dudley means is "very positive implications" for corporate profits--but not the workers who produce those profits.

The effects of the drive to raise labor productivity can be seen throughout the economy--most obviously, in the confrontation between management and unions at Verizon, but in every workplace where the bosses call on workers to "sacrifice" and work harder to get through "tough times." The "sacrificing" is never equal.

Don't be surprised to see more favorable economic statistics in the coming months. The Bush administration's tax cut giveaways are pumping money into the system, and while critics are right that much of the cash will end up in the bank accounts of the rich, they will still have some impact.

The White House is determined to produce a short-term recovery in time for next year's election. But even if they succeed, the long-term problems will be left untouched--above all, high levels of overcapacity and debt in Corporate America, which will continue to dampen investment and slow down an economic expansion that would produce new jobs.

The truth is that Corporate America can get out of any crisis if it can make workers pay the price. They're at it again--and that's the real story of the economic statistics that the Wall Street analysts were so enthusiastic about last week.

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