|
|
|
EDITORIAL Shut out of the boom--and tough times ahead September 14, 2007 | Page 2
THE UNEXPECTED decline in employment in August sent yet another wave of panic through the stock market and raised the possibility that the slowing U.S. economy could be headed into a recession.
Instead of the 100,000 new jobs economists expected would be added in August, the job market shrank by 4,000 instead. "This was a lousy jobs report," wrote Nigel Gault of the economic research company Global Insight. "The only 'good' news was that the unemployment rate held steady at 4.6 percent, but it is only a matter of time before the unemployment rate heads higher...
"[The] report covered the middle of the month, before the major impact of August's financial turbulence had time to pass through (for example, to mortgage company layoffs). As such, it presents a picture of the labor market as it headed into August's storms--and it is not a pretty one."
What's more, the unemployment rate is deceptively low, as has been the case throughout the current economic expansion.
Unlike the 1990s boom, when U.S. employment levels reached their highest levels since the Second World War, the relatively low unemployment figures today are largely the result of people dropping out of the labor market--individuals who the Labor Department calls "discouraged workers."
According to The State of Working America 2006-2007, published by the Economic Policy Institute (EPI), job growth during this decade has lagged well behind the 1990s. In past economic expansions, it took an average of 21 months for the U.S. economy to make up the jobs lost during the preceding recession. During the expansion in of this decade, it took twice as long--46 months--for employment to reach pre-recession levels.
Now, the government is reporting a decline in jobs--due largely to a large monthly fall-off of 340,000 in the overall size of the labor force, which is why the unemployment rate remained unchanged.
"It's an extremely unusual event for jobs to decline in the middle of a period of healthy growth," said left-wing economist Dean Baker. Baker adds that worse is still to come--because the government's jobs survey "is for the pay period that included August 12th. Many mortgage companies announced large layoffs in August, but most of these workers would still have been on the payroll on the 10th."
In parts of the country, unemployment was already plenty bad. "The Midwest labor market is feeling a double-barrel blast from the national housing slump and the continuing woes of Detroit's auto makers," the Wall Street Journal reported. "[A]cross the region, factories that churn out the bricks, tiles and wallboard used to build new homes are feeling the effect of the steep decline in new home construction in once-hot markets such as California, Arizona, Nevada and Florida."
Manufacturing lost 46,000 jobs in August, adding to the 3 million manufacturing jobs wiped out since the 2001 recession. As of July, unemployment in Wisconsin, Michigan, Illinois, Indiana and Ohio averaged 5.7 percent, with joblessness in Michigan reaching 7.2 percent. The picture in that region looks gloomier still as GM plans to cut production by 10 percent.
For workers, the shrinkage in the job market compounds problems that haven't gotten better during the economic expansion.
Pointing out that Census data has shown a drop of 1 percent in median earnings for full-time workers in 2006, economist and writer Robert Kuttner pointed out that "only the most affluent one-fifth of U.S. households had net income gains between 2000 and 2006. The rest had declines, despite productivity growth averaging about 3 percent per year."
A major reason employers could get away with this is the long-term drop in unionization rates, which is just 7.4 percent in the private sector.
Then there's the problem of expensive--and unattainable--health care. Over the past seven years, the number of uninsured Americans has grown by 7 million people.
Meanwhile, retirement is at best a roll of the dice: Just 20 percent of workers in the private sector have defined benefit pensions, compared to 43 percent with defined contribution retirement systems like 401(k) plans, which depend on workers' and employer contributions. The personal savings rate, meanwhile, is negative--meaning that workers are drowning in debt.
- - - - - - - - - - - - - - - -
By any measure, inequality is rapidly worsening, with staggering concentrations of wealth among a tiny minority. As the EPI pointed out, the share of capital income flowing to the richest 1 percent of people was 37.8 percent back in 1979. Today, it is 57.5 percent.
One key reason: The share of overall income throughout the economy that went to corporate profits was at the highest point ever in 2006. "Corporate profits have grown at a faster pace in the current recovery than in any other equivalent period since World War II," the Center on Budget and Policy Priorities noted.
All this means that workers, squeezed during the boom, will fare worse in the next recession. The limited government measures announced to shore up the mortgage market, for example, will do much more to bail out lenders than help overstretched workers struggling to avoid foreclosure.
This class polarization hasn't found any direct expression in U.S. politics, aside from some populist posturing from a few of the Democratic presidential candidates. But the social pressures are building that will thrust the question of class inequality into the center of U.S. politics in the future.
|