Jobs Report Tells Us the U.S. Economy Still in Desperate Need of Electroshock

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While the attention of the media and lawmakers in Washington has flitted from the recent government shutdown to the troubled rollout of the Obamacare website, today’s jobs numbers offer a stark reminder that the U.S. economy has yet to recover from the problems that have dogged it since at least as far back as the financial crisis.

The Labor Department announced this morning that the U.S. economy added 148,000 jobs in September, while revisions of previous reports showed that there were 9,000 more jobs in the economy than previously thought. While the headline unemployment rate fell from 7.3% to 7.2%, the actual change was a decline from the August rate of 7.278% to  7.235% in September so the headline rounding doesn’t represent a significant decline.

The unemployment rate’s decline would be proceeding at an even slower pace if there weren’t more dropping out of the labor market altogether. As a result of a generally aging workforce, the number of people who want to work had been on the decline even before the financial crisis, but the weakness of the economy has accelerated this trend:

US Labor Force Participation Rate Chart

US Labor Force Participation Rate data by YCharts

Another way to illustrate this point is to show that while we’ve been consistently adding jobs since the recession ended in 2009, the economy still 1.8 million fewer jobs than in 2008:

US Total Nonfarm Payrolls Chart

US Total Nonfarm Payrolls data by YCharts

Another force holding back the job market and the economy is the slow pace of wage growth. This morning’s report showed that the average hourly earnings for all employees rose by three cents, and 49 cents for the year. The good news is that wage growth has been slightly outpacing inflation over the past year and since the recession. The bad news is that it’s only very slightly outpacing inflation, and the stagnant pace of wage growth is a continuation of a trend that has been happening since more or less the 1970s.

Even the modest economic and job growth we are seeing aren’t filtering down to the average Joe. Politicians on the left and right will use these numbers to trumpet their favorite policy prescriptions, and there’s no doubt that Congress’ antics aren’t helping the labor market. But much of what is ailing the economy are long-term trends that have plagued us through periods in which both conservative and liberal economic policies were being implemented.

10 comments
vadertime
vadertime

I think the key phrase is the stagnation of wage growth since the 1970s. Middle class Americans actually have less buying power today than they did 40 years ago and doesn't appear to be getting better. This 7% unemployment rate may be the new normal. I read an article the other day written by an economist who  pointed out that the economic productivity has rebounded, wall street has rebounded and the housing market has rebounded. However, jobs have not come back. We are 5 years into this flaccid recovery where job growth has not occurred. Most of the decline in the unemployment rate is from people leaving the work force. These are people who want to work and can work, but are unable to find jobs either because of outdated skills or the type of work that has been replaced by technology. This trend will continue and it does not bode well for an advanced industrial nation like ours. The bifurcation of the concentration of wealth and resources will continue as more of this is concentrated in the top 5% of the population while the remaining 95% will have to be content we much,much less. 

EdMacClannan
EdMacClannan

So .49 cents and hour wage increase over the past year (12 months) has only "basically" kept pace or ahead of inflation....  And the Obama Administration gave a princely sum of 1.5% to retirees, veterans, and Social Security recipients.  Okay, I am glad somebody else noticed that their is more inflation in the past 12-months than previously acknowledged. 

Karl
Karl

The only thing that has improved since 08 has been the stock market, that has given one class in the USA a good feeling about the economy. Rock bottom interest rates and rising stocks are just another bubble in an economy now addicted to them. None of this is Obama's fault it has slowly been built into the system by greedy bankers and useless regulators since Reagan. One false slip and MSNBC's money channel will be non-stop Great Recession, continued. I think you have to be a certain age and still living in the real world instead of the virtual one of twitter, fb, instagram, computer games and TMZ style celebrity gossip to realize how bad the economy is for most of us today.

DeanJackson
DeanJackson

The caption reads, "Jobs Report Tells Us the US Economy Still in Desperate Need of Electroshock"

Economies don't resuscitate following the example of the biological sciences, they resuscitate via expected returns on investments!

Because of the Federal Reserve's inexplicable low interest rate policy, net (new) investments are effectively prevented from being undertaken, because there is no expected return (which is a function of interest) on such investments.


Now this low interest rate policy phenomena is also being implemented by the Bank of England, the European Central Bank and the Bank of Japan, indicating that there is a third force pulling those central banks' strings for the purpose of economic sabotage. Whose the puppet master, you ask? Moscow and her allies, who else? Now you know why Western political parties refused to verify the "collapses" of the East Bloc and USSR, because Western political parties were already co-opted. The only way the Communists could have pulled off this new strategy, is if Western political parties were co-opted, otherwise the West would have demanded proof of the "collapses", since the survival of the West depended on such proof.

Imagine it’s March 1944 and the Allies receive word from Berlin that Hitler and his inner circle are dead, cremated, and the Nazi government has collapsed. What do you think the reaction of the Allies would have been? To pack up the war, demobilize the armies? Ah, no. The Allies would have demanded that an occupation of Germany take place, where the Allies (1) could ensure that the Nazi government in Berlin had indeed fallen; and (2) prepare Germany, to the satisfaction of the Allies, to enter the pantheon of democratic nations. With that in mind...

barneydidit
barneydidit

The economy is hosed and there's not much Obama can (or will) do about it. He can't get back the half a trillion dollars we've spent on two wars over the last decade that could have been spent on infrastructure improvements. He can't get back the $1.5 trillion we've lost due to the Bush tax cuts. And Obama can't (and/or won't) restructure the tax codes so that the middle class stops disappearing. 

Ironically, it's the right wing that keeps slamming Obamacare, and won't even pretend to look at a single payer system (even an optional one like the Democrats put forward in 09), yet study after study shows that as many as half the working population of this country are afraid to either change jobs, or go out and start their own business because they can't afford the potential loss of health insurance. 

So instead we have Conservatives everywhere telling us what a bad job Obama must be doing because the economy is essentially treading water, and yet they won't look at the changes that are necessary to improve the situation. They do however seem to believe that "tax cuts" is still the solution, so they're still fitting the classic definition of insanity I guess. 

ThomasHall
ThomasHall

The largest force holding back economic and job growth has been the GOP obstructionism of an all-time record of 430+ blocked bills including the Jobs Bill, the Transportation Bill, the Farm Bill and job creation and growth from infrastructure jobs, clean-energy jobs, and research. the GOP hated the successful TARP bailouts, the auto industry revival that created hundreds of thousands of new jobs while supporting private sector auto industry dependent jobs and the successful ARRA stimulus. 

In contrast, the unpaid-for, 12+ year, $2.8 TRILLION  Bush tax cuts most of which went to rich failed to create jobs just as the GOP-Reagan-to-present "trickle-down economics" increased incomes for the top one percent by 275% while the Middle Class shrank by 25% and wages for the 99% stagnated. The GOP have deliberately sabotaged the economy and jobs hoping first to use it against the President in 2012 when they repeated the National Debt (most of which was created by just Reagan, Bush I and II) over and over, the unemployment rate, and the numbers on food stamps thanks mostly to their deregulated Wall St. bankster fraud mortgage meltdown. 

The figures are starting to come in as to the cost of the GOP obstructionism and extortionist tactics that have cost three million jobs and over 1% of GDP economic growth; in 2011, the GOP cost investors trillions when their tactics dropped the DOW 2,500 points and lower the US credit rating adding another $18 billion/10 years in debt interest; their latest fed shutdown cost $24 billion plus employee, state and local losses, and held-up contracts die to lack of fed inspectors. The GOP consistently put partisan politics ahead of the country, nothing patriotic about that. they also oppose minimum wages and the raising of minimum wages which would also boost the economy and job growth in our 70% consumer-driven economy.

Makes one wonder how bad the GOP must become before the working class realize that the pro-rich, anti-poor, anti-worker GOP have historically NEVER represented the working class.

DeweySayenoff
DeweySayenoff

@DeanJackson"Economies don't resuscitate following the example of the biological sciences, they resuscitate via expected returns on investments" 

With all due courtesy and respect, Bullhockey.  In friendlier terms, you're putting the horse behind the cart.  Before investments will stimulate job creation, you have to have demand for the goods and services a business makes.  Lowering prices doesn't stimulate demand if there's no discretionary revenue out there to spend on it.  And no business is going to hire anyone new if there's no demand, even if they have the cash to do that.

Let's look at how the economy REALLY works.

We have a capitalistic economy.  ALL capitalistic economies operate on a simple, but fundamental, principle: Bottom up spending.

Now, supply side voo doo would have people pooling their money to invest in a business to sell stuff.  They then hire a bunch of people and make things at lower prices that people buy. It's a great idea, except you have to have money in the system to be spent on those low-priced goods in the first place to do that.  The lion's share of revenue coming into a business MUST BE from customers willing to part with their hard-earned greenbacks.  Let's face it, no business regardless of how many investors they have or how much of a cash reserve they've amassed, is going to hire ANYONE if there's no demand for their stuff.  If they do, they'll rapidly go out of business

In today's economy, the job growth is in low-wage, part-time employment.  That does NOT put discretionary income into the pockets of people nor give them any sense of fiscal security that's mandatory for them to even spend what little they do have on anything other than the basic necessities.

Today, we have a situation where no one (or too few, which amounts to the same effect) is buying anything because they have no extra money to spend, and grossly overcapitalized businesses not hiring anyone because no one's spending money to buy their stuff.

This is where supply-side economics fails - businesses (reasonably and not unexpectedly) don't hire anyone new if they don't have increased demand.  In fact, they tend to place MORE responsibility and work on the employees they do have (without extra compensation, I might add) until their employees can't stand it any more before they DO hire anyone new when demand picks up.  There is always a MAJOR lag between increased demand and new job growth - and that lag tends to kill or reduce any upward improvement in the economy.

Look at what's happening in Europe.  Austerity in a semi-socialist economy???  That's saying, we're not making enough from taxes, so we're going to cut back on the jobs that pay the taxes.  And the inevitable results of destroying your tax revenue sources is why they're having issues.

As much as it pains me to say this, deficit spending is actually a BETTER thing in a bad economy (assuming it's done right - which it isn't here) because SPENDING is what drives DEMAND. I don't advocate it as a primary way of dealing with the economy, though.  It's inefficient and very short-term, which doesn't address the need to improve the long-term economic mood of the spenders (Something investments do not address at all, either).

Bottom up spending CAN be stimulated without deficit spending.  Looking at the situation, the "job creators" have tons of cash - businesses and the wealthy both.  They've long since recovered their losses and are sprinting ahead.  Look at Wall Street.  (Which reminds me of the joke, the wealthy are sure making a lot of money in our socialist economy).

This is the final nail in the coffin of providing tax relief to the wealthy as a way of STIMULATING the current economy.  You do that to SLOW IT DOWN, because when you cut taxes on those who can most afford to pay them, you increase them on those who can least afford to pay them.  That takes away discretionary revenue from the hundreds of millions of Americans who actually have enough money (as a group) in enough places to spend to keep the economy GOING.

It's not like the working poor and middle class are getting handouts - no more so than the wealthy have been with their tax cuts.  These are hard-working EMPLOYED Americans.  It's not an increase in entitlements (well, it kind of is since were I doing it, I'd remove the maximum taxable income cap on Social Security, but that's not part of this idea here).  It's not an increase in spending.  It's simply putting the tax burden on those who have the money to pay it without noticing any measurable decrease in lifestyle, and off those who will spend the money they get. The idea here isn't to create freeloaders.  It's to provide a long-term method of ensuring more money in the pockets of people who spend most of their income.

If the wealthy spend as much of their income by percentage on things as the rest of the nation, this would NOT be necessary.  But they don't, so it is.

In World War Two, the taxes on the top earners in the U.S. peaked at 96%.  None of them were forced into the streets because of that.  They enjoyed the rich lifestyle because the 4% they kept was still orders of magnitude more than the average worker made.  The tax rates obviously came down on them, and was put back on the workers, since then, but that allowed massive revenue to be collected to fund the war.  Today, the emergency isn't as clear cut, but the need for shifting tax burdens until they can be made fairer again (in order to slow down a run-away economy) is patently obvious from a basic capitalist point of view.

Stimulate bottom up spending by shifting the tax burden that will put more money into the pockets of working middle-class and poor Americans who will spend it which will generate the demand necessary to force businesses to create new jobs with liveable wages.  Once the economy is rolling, slowly return the balance of taxation to what it needs to be to keep the economy going strong without running away.

No handouts.  No free rides.  Everyone doing their share for the good of the economy and the country like the patriotic Americans we all claim to be.  In the long run, everyone has a better chance to win.  What's fairer than that?

frankenria59
frankenria59

@ThomasHall Yes, perfect article, besides, the data about expenditures is suitable, however, we are frequently asked a question - do really the presidents represent the real authority in united states? Or they are the symbolic figures on global chessboard? Should we doubt the fact that presidents can be manipulated, at all? In this articleWe ask you as an expert in this area of knowledge and finally, is it possible to say that presidents represent interests of biggest economic subjects, not people?

DeanJackson
DeanJackson

@DeweySayenoff says, "Before investments will stimulate job creation, you have to have demand for the goods and services a business makes. "

Demand IS the increased savings that higher interest rates generate; Supply = Demand. Without higher interest rates, there's no investments that creates the products purchased by the [demanding] consumer. Your conception of creating demand is actually consumption spending, not investment, where the government expends monies for make-work projects. Such government make-work projects are consumption, since they don't increase the productivity of capital. That is government make-work projects are not investments that (1) produces more consumption goods at cheaper prices; and (2) lowers the cost of business via new technologies.








ThomasHall
ThomasHall

@frankenria59 @ThomasHall I agree that Presidents are indeed influenced by the big money players even those Democratic presidents like Clinton and now Pres. Obama since it is the big money donors that fuel campaigns. Clinton and his economic advisers like Rubin and Summers bought into the GOP and Greenspan deregulation of the banks and the repeal of Glass-Stegall that allowed banks to become risky investment houses risking other people's money which proved disastrous. 

Pres. Obama by nature is not a diehard politician like Clinton or Reagan, etc. but more of a professorial statesman whose genuine concern is for the working class who have been abused and exploited for many decades unlike the Bushes who were rich and catered to the rich and brought in an entire administration of corporate insiders that changed regs for the rich like rewriting the bankruptcy laws not to benefit consumers but the banks and credit card companies many of which were later bailed out, or eliminating middle management overtime, moving class action lawsuits to fed courts, rollbacks on the environment, allowing the energy and chemical companies to write their own regs behind closed doors, etc.

The first bill signed by Pres. Obama was the equal pay for women, Lilly Ledbetter Law, opposed by the GOP. In short, it becomes a balancing act and Democratic presidents tilt toward the working class while the GOP, who have historically NEVER represented the working class, tilt toward the rich. Pretty obvious really, but first one has to get elected and the GOP have flooded the system with money effecting Democrats as well.