A Return to Full Employment With Mixed Signals: This Time is Different for the World of Employment

SOURCE ITEMS

Chart-Employed Full Time Trend

St. Louis Federal Reserve, Accessed December 13, 2015.

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The Netherlands seems to be undergoing a sort of industrial revolution in reverse, with jobs moving from factories to homes. The Dutch labor market has the highest concentration of part-time and freelance workers in Europe, with nearly 50% of all Dutch workers, and 62% of young workers, engaged in part-time employment – a luxury afforded to them by the country’s relatively high hourly wages.

Sami Mahroum and Elif Bascavusoglu-Moreau, Is Jobless Growth Inevitable? Project Syndicate, March 25, 2015. Accessed December 13, 2015.

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Inequality, exclusion, and duality became more marked in countries where skills were poorly distributed and many services approximated the textbook “ideal” of spot markets. The United States, where many workers are forced to hold multiple jobs in order to make an adequate living, remains the canonical example of this model.

Dani Rodrik, The Evolution of Work, Project Syndicate, December 9, 2015. Accessed December 13, 2015.

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Forced labor permeates supply chains that stretch across the globe, from remote farms in Africa and the seas off Southeast Asia to supermarkets in America and Europe. Almost 21 million people are enslaved for profit worldwide, the UN says, providing $150 billion in illicit revenue every year.

Erik Larson, These Lawyers Want Slave Labor Warnings on Your Cat Food, Bloomberg, December 10, 2015. Accessed December 13, 2015.

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Over all, the Labor Department data painted a picture of an economy that is growing steadily and creating jobs at a healthy pace, even as wage gains remain subdued and many Americans are still stuck on the sidelines of the recovery.

Nelson D. Schwartz, Robust Jobs Report All but Guarantees Fed Will Raise Rates, New York Times, December 4, 2015. Accessed December 13, 2015.

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In reality, the 35-hour workweek has become mostly symbolic, because a multitude of loopholes allow companies to work around the law. French employees work an average of 40.5 hours a week — more than the 40-hour average in the European Union — and have high productivity.

Liz Alderman, Smart Car Standoff Pits Social Progress Against Global Competition, New York Times, December 12, 2015. Accessed December 13, 2015.

COMMENTS

A question emerged after 2008 that unsettled the field of economics and is still unanswered: is this time different? Was the financial crisis of 2008 an economic crisis of a unique kind in the history of capitalism; or was it just a very severe version of a routine kind of economic crisis?

This phrase gained currency from the publication of the book, This Time is Different: Eight Centuries of Financial Folly, by Carmen Reinhart Kenneth Rogoff.[1] They argue that the financial crisis of 2008 is not different. But others disagree.

In a 2012 article, Lawrence King et al make the argument that this time is different because it is the result of a level of financial liberalization and a degree of free market economics that did not exist before the 1970s.[2]

A few of our world’s best and brightest economists expressed their uncertainty and sense that this time is different in this way:

“As a world economic crisis developed in 2008 and lasted longer than most economists predicted, it became increasingly clear that beliefs about macroeconomics and macroeconomic policy needed to be thoroughly examined. … we knew that we had entered a brave new world…”[3]

Different Seems More Likely Than the Same

After 2008 optimism about a return to robust economic growth has been the rule. But actual economic growth has not rewarded that optimism. A few economists have been trying to explain this poor record.

Robert J. Gordon, professor of economics at Northwestern University, recently asserted that “It is time to raise basic questions about the process of economic growth, especially the assumption – nearly universal since Solow’s seminal contributions of the 1950s (Solow 1956) – that economic growth is a continuous process that will persist forever.” He went on to propose that U.S. economic growth may grind to a halt because the kinds of technological innovations that drove rapid U.S. economic growth are not on the horizon.[4]

Professor Gordon was speaking only about the U.S., but the logic would apply to all of the world’s affluent nations.  Moreover, the World Bank and other global institutions have repeatedly warned of below par levels of global economic growth, in some cases for years to come.

Weighing anecdotal evidence, some discernible trends, and expert opinion, it seems reasonable to conclude that this time is different for economic growth.

That means this time is almost certainly different for the world of employment.

A Different World of Employment

In mainstream theories of economic development, the future of work is directly tied to the future of economic growth. Economic growth is the engine that pushes us toward the ever expanding prosperity goals that make for widespread affluence: high profits, high wages, and full employment. When economic growth slows down something has to give in the world of employment.  We are trapped in a long period of slow economic growth, so the employment trends of the past cannot continue.

We can be fairly certain that workers in the U.S. and other affluent nations will not experience the kind of return to full employment with high wage conditions we have known in the past. In the context of global competition and slow economic growth,  the world’s economic and political leaders are pressing hard to cap and reduce wage bills at all levels of employment. We have entered into an era of global degradation of employment.

In affluent nations they  are forcing working people to choose between fewer jobs and fewer hours at higher compensation levels or more jobs and more hours with lower wages and less valuable benefits.  In the rest of the world, where such a choice has seldom existed in any meaningful sense,  global competition and slow economic growth mean an end to the dream of jobs that will deliver better lives.  Everywhere, employment rights and workplace protections are falling away.

What we don’t know quite yet is how the ongoing degradation of the world of employment will play out in national and global politics. At the moment it appears that the world’s political and economic leaders have chosen to promote a free-for-all battle struggle among working people by defining rights to crumbs from the capitalist table using the old reactionary lines of difference – race, ethnicity, gender, religion, and nation. And, at the moment, too many workers in affluent nations are falling into this trap, as shown by the rise of Trumpism in the U.S., the growth of reactionary movements across Europe, and the destruction of governing institutions that embody common interests, and the rise of militaristic movements intent on redrawing national boundaries.

Intentionally engendering antagonisms can’t solve the fundamental problems for global economic growth, so the right wing policies can have only one ultimate outcome – a global catastrophe in multiple forms. Hopefully, this  will become clear to the world’s working people well before such a catastrophe becomes unavoidable.

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[1] Carmen M. Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009.

[2] Lawrence King, Michael Kitson, Sue Konzelmann and Frank Wilkinson Making the same mistake again—or is this time different? Cambridge Journal of Economics 2012, 36, 1–15 doi:10.1093/cje/ber045.

[3] From the Preface: Olivier J. Blanchard, David Romer, A. Michael Spence and Joseph E. Stiglitz, In the Wake of the Crisis: Leading Economists Reassess Economic Policy, MIT Press, 2012.

[4] Robert J. Gordon, Is US economic growth over? Faltering innovation confronts the six headwinds, VOX, September 11, 2012. http://www.voxeu.org/article/us-economic-growth-over.

Crisis and Recovery Work: the Future of Jobs in the World Economy

 

SOURCE ITEMS

Pipes carrying Flint River water are opened; the Detroit supply is shut off. The switch was made as a cost-saving measure for the struggling, black-majority city. Soon after, residents begin to complain about the water’s color, taste and odor, and report rashes and concerns about bacteria. … Flint urges residents to stop drinking water after government epidemiologists validate Dr. Hanna-Attisha’s finding of high lead levels. Mr. Snyder orders the distribution of filters, the testing of water in schools, and the expansion of water and blood testing.

Jeremy C.F. Lin, Jean Rutter and Haeyoun Park, Events That Led to Flint’s Water Crisis., New York Times, January 21, 2016. Accessed January 22, 2016.

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Health care employment expanded by 475,000 in 2015, compared with a gain of 309,000 in 2014.Chart-Job Growth by Sector 2015

 

Source: Current Employment Statistics Highlights, December 2015, Bureau of Labor Statistics, January 8, 2016. Accessed January 22, 2016.

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Air, sea and land transport networks continue to expand in reach, speed of travel and volume of passengers and goods carried. Pathogens and their vectors can now move further, faster and in greater numbers than ever before. Three important consequences of global transport network expansion are infectious disease pandemics, vector invasion events and vector-borne pathogen importation.

Tatem, A.J., D.J. Rogers, and S.I. Hay. Global Transport Networks and Infectious Disease Spread. Advances in parasitology 62 (2006): 293–343. PMC. Web. 22 Jan. 2016.

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Thus, the net gain in jobs in New Jersey over the four year period would be 270,000 (281,000 construction-related jobs less 11,000 Travel and Tourism-related jobs). Of the 281,000 construction-related jobs, about 218,000 will be direct construction jobs. …

If all of this money is spent on reconstruction, the influx of new spending will generate $53.1 billion in new total output in those 13 counties and about 352,000 new jobs. About 299,000 jobs will be construction jobs.

Economic Impact of Hurricane Sandy, Economics and Statistics Administration, U.S. Department of Commerce, September 2013

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Future warming will bring a more volatile, dangerous world, even if the world manages to keep temperature rises within a 2C limit to which governments have committed, Fischer’s research found. On average, any given place on Earth will experience 60% more extreme rain events and 27 extremely hot days.

Karl Mathiesen, Extreme weather already on increase due to climate change, study finds, The Guardian, U.S. Edition, April 27, 2015.

COMMENTS

Safe water is one of those items of wealth that comes to us as both natural wealth and fabricated wealth. We sip water purified by nature from natural springs and we sip water purified by factories from our water taps.

The water crisis in Flint Michigan illustrates the extent to which we humans have damaged the natural production of many forms of wealth and been forced to replace natural wealth with fabricated wealth. Therein lies the story of job growth in the 21st century.

During the expansive years of capitalism (roughly the 16th century through the first half of the 20th century), we increasingly used fossil fuels to transform natural wealth into fabricated wealth. We had our eyes on the growing stock of fabricated wealth and failed to see the costs in natural wealth. Now we are beginning to see that there is no free lunch. The notion that humans figured out how to add to the total stock of wealth on the planet (the notion of creating fabricated wealth at no cost to natural wealth) has turned out to be an accounting sleight of hand.

We have never been able to increase net total wealth (natural wealth + fabricated wealth). By defining nations as economies, we externalized all costs to other nations and to nature and counted only what we wanted to: fabricated wealth. Our riches seemed to grow without end. Now we can no longer expand the stock of fabricated wealth fast enough to stay ahead of normal wear and tear and a rising tide of social, geopolitical, and ecological disasters.

The work we want to do is steadily being replaced by the work we must do. Steadily, our working hands and minds are being turned to the task of fixing damage inflicted on our fabricated wealth by domestic conflicts, wars, climate events, and just plain old wear and tear; and to the task of fixing the damages we have inflicted and continue to inflict on natural wealth.

The rate at which the world’s fabricated and natural wealth are being damaged is growing fast, so more and more our jobs will be in industries that repair our bodies (and replace body parts), that repair and replace our essential fabricated items of wealth (e.g., homes, tools, transportation equipment, educational facilities, health care technologies) and that repair the planetary systems we have damaged. The proportion of jobs that produce goods and services that can be counted as net new fabricated wealth will go down.

Into the 20th century, job growth was associated with expanding the production of net new fabricated wealth. That era is over. Job growth is now becoming associated with survival goals in place of greater affluence goals.

STEM Education Falls Short: The Problem is Too Few Jobs, Not Too Little Education

SOURCE ITEMS

According to new statistics from the 2012 American Community Survey, engineering and computer, math and statistics majors had the largest share of graduates going into a STEM field with about half employed in a STEM occupation. Science majors had fewer of their graduates employed in STEM. About 26 percent of physical science majors; 15 percent of biological, environmental and agricultural sciences majors; 10 percent of psychology majors; and 7 percent of social science majors were employed in STEM.

 Census Bureau Reports Majority of STEM College Graduates Do Not Work in STEM Occupations, U.S. Census Bureau, July 2014.

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Since cohort-wage profiles display a similar pattern, these findings appear to fit with a strong increase in demand for cognitive tasks in the 1990s followed by a decline in the 2000s.

 Paul Beaudry, David A. Green, and Benjamin M. Sand. The Declining Fortunes of the Young since 2000, American Economic Review, 2014

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Chart-Labor Force Participation Rate Trend

The labor force is anticipated to grow by 8.5 million, an annual growth rate of 0.5 percent, over the 2012–2022 period. The growth in the labor force during 2012–2022 is projected to be smaller than in the previous 10-year period, 2002–2012, when the labor force grew by 10.1 million, a 0.7-percent annual growth rate.

 Labor force projections to 2022: the labor force participation rate continues to fall, Monthly Labor Review, December 2013.

 COMMENTS

We now live in a world economy in which economic processes and trends are global. Global economic growth is constrained and will continue to be into the foreseeable future. As a consequence, current patterns of investment, domestic and global, will not generate a sufficient number of jobs to produce anything near global full employment at living wages.

Economic activity in the U.S. does not constitute a separate economy, so U.S. economy policies cannot produce full employment and high wages in the U.S. while the rest of the world is stuck with high rates of unemployment and low wages.   Investment follows profits.  Profits are maximized by producing in low income places in the world economy and selling in high income places.  Unfettered transnational flows of capital and commodities combined with preventing low-skill working people from easily crossing national boundaries in search of work gives the world’s investors the legal framework with which to manage the world’s labor supply to their advantage.

February Job Numbers: Evidence for a Growth Trend or Just One More Outlier in an Era of Employment Volatility and Too Little Growth?

SOURCE ITEMS

Chart-Current Job Growth Not as Strong as last yearSource: Employment Situation Summary Table B. Establishment data, seasonally adjusted, Bureau of Labor Statistics Economic News Release, March 8, 2013. 

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Chart-Industries with largest employ increases, feb 2013 Source: Employment Situation Summary Table B. Establishment data,seasonally adjusted, Bureau of Labor Statistics Economic News Release, March 8, 2013.

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Looking at a series of economic indicators, and going back to the costliest 18 hurricanes of postwar history along with the Northridge earthquake of 1994, Goldman’s research team found that retail sales, construction spending, and industrial production “show a clear dip in the month of the disaster, followed by a significant recovery within 1-3 months that typically takes their growth rate above that seen prior to the disaster.”

Agustino Fontevecchia, Despite $50B In Damages, Hurricane Sandy Will Be Good For The Economy, Goldman Says, Forbes, 11/06/2012.

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Chart-Construction employment in Louisiana, 2002-12  Chart generated by BLS State and Area Employment web site.

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The largest global disasters of 2012 were Hurricane Sandy (with a cost of $65 billion) and the year-long Midwest/Plains drought ($35 billion), according to the company’s Annual Global Climate and Catastrophe Report, which was prepared by Aon Benfield’s Impact Forecasting division.

Doyle Rice, Hurricane Sandy, drought cost U.S. $100 billion, USA TODAY,  January 25, 2013.

————— Chart-Major Disaster Declarations 1953-2011

Bruce R. Lindsay, Francis X. McCarthy, Stafford Act Declarations 1953-2011: Trends and Analyses, and Implications for Congress, Congressional Research Service, August 31, 2012

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Joel Naroff of Naroff Economic Advisors … expects average monthly job gains of 200,000-plus this year if the White House and Congress can agree to put off the budget cuts. If all the reductions occur, it likely would mean monthly gains of about 165,000, he says.

Paul Davidson, Employers add a stunning 236,000 jobs in Feb., USA TODAY, March 8, 2013.

COMMENTS

Stronger than usual February job growth is widely hailed as part of an economic recovery in the U.S. that many are seeing in recent positive market signals – rising housing prices and a flourishing stock market, for examples.  The explicit expectation is that we will not look back a year from now and see February’s 236,000 added jobs as only an outlier in year of mostly disappointing employment news.

It is possible that job growth will be strong this year, but it is unlikely.

Several factors involved in the production of February’s job growth numbers suggest that job growth numbers will bounce up and down in 2013 as they have in the past and leave the U.S with unemployment, underemployment, and labor force participation rates much as they are today.

Job growth is weaker this year than last

The first indicator that we should not put much stock in February job growth numbers is that job growth numbers for January and February 2012 were considerably better than the numbers for January and February 2013.  Yet 2012 ended with little progress toward getting Americans back to work.

Unpredictable weather events may be a factor in February job numbers

Both the Midwest/Plains drought and Hurricane Sandy damaged industries and destroyed property.  Smaller weather events, such as severe winter storms, have also done damage.

Rebuilding after Hurricane Sandy and repairs following winter storms could well have contributed to February job numbers.  In the case of Hurricane Sandy, which did $50 billion or more in damage, cleanup, redevelopment planning, negotiating insurance payments, and getting money flowing from government agencies may have pushed much of the impact on the demand for goods and services into 2013.  So, it is possible that:

  • the impact of Hurricane Sandy on the construction and retail industries is just now peaking
  • hospitality and leisure are still be benefiting from housing people displaced by the hurricane
  • Hurricane Sandy still has a significant impact on the demand for social services
  • some professional and business services, such as legal, architectural, engineering, document preparation and clerical, security and surveillance, cleaning, and waste disposal services, are part of recovery efforts related to Hurricane Sandy.

Employment related to Hurricane Sandy and winter storms will fall off as the year progresses.  Of course, other disasters and damaging weather events will strike.  But, when and where those events strike and how much demand for goods and services they will generate can’t be known.

It is fairly certain, though, that the impact of large and small natural disasters on employment will grow larger over the coming years, adding more volatility to month to month job growth numbers.

 Volatile government spending adds volatility to some private sector industries  

Although jobs in health care and social services are listed in the private sector, many of those jobs are paid for by grants and contracts from local, state, and federal government agencies.  The same is true for employment in most educational institutions and in many manufacturing business service industries that supply goods to government agencies.

Given the volatile political tugs-of-war over revenue and spending policies at all levels of government, jobs in industries with federal funding can come and go quickly.  Perhaps some of this effect is in the February job numbers.

A final note

 It is good to have job growth, but it is certainly less than optimal if a growing proportion of new jobs are associated with repairing and replacing the damaged wealth of those who already have it rather than creating new wealth to be shared with the very large number of Americans who have no net wealth at all.

Climate change and government gridlock are robbing both those of us with wealth and those of us without it.

The Annual Season of Spending Is Routinely Misinterpreted by Economists and Financial Experts, Creating Cycles of Hope and Disappointment

SOURCE ITEMS

Chart-Employment-Over the month change, 2010-13

The Employment Situation for January 2013 News Release (PDF Version), Bureau of Labor Statistics, February 1, 2013.

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Chart-Quarter to quarter growth in real GDP

U.S. Bureau of Economic Analysis, January 20, 2013.

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Despite a moderate pick-up in output growth expected for 2013–14, the unemployment rate is set to increase again and the number of unemployed worldwide is projected to rise by 5.1 million in 2013, to more than 202 million in 2013 and by another 3 million in 2014.

Executive Summary, Global Employment Trends 2013, International Labour Organization, January 2013.

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As the global economy has gone from crisis to crisis in recent years, the cure has become part of the disease. In an era of zero interest rates and quantitative easing, macroeconomic policy has become unhinged from a tough post-crisis reality. Untested medicine is being used to treat the wrong ailment – and the chronically ill patient continues to be neglected.

Stephen S. Roach, Macro Malpractice, Project Syndicate, Sep. 30, 2012.

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The euro-area recession deepened more than economists forecast with the worst performance in almost four years as the region’s three biggest economies suffered slumping output.

The European data chimed with statistics in Japan, where the economy unexpectedly shrank last quarter as falling exports and a business investment slump outweighed improved consumption. GDP fell an annualized 0.4 percent, following a 3.8 percent fall in the previous quarter.

Marcus Bensasson, Euro-Area Economy Shrinks Most Since Depths of Recession, Bloomberg, February 14, 2013.

COMMENTS

Every year a spate of optimistic stories about the recovery from The Great Recession pour into American homes, offices and automobiles, as businesses and consumers rev up for the annual Season of Spending (and Hopeful Signs).  This season begins with the returns to school in August and September and ends with the post-holiday sales in early January.

Soon after the Season of Spending ends, the optimistic stories begin to disappear as the economists and financial experts to whom writers and commentators in the media turn for information begin to grudgingly acknowledge that all is not well, after all, in the land of beautiful spending.  The Season of Spending fades into memory and the artificially pumped up optimism of American business owners and consumers gives way to disappointment.

The annual cycle of positive and negative economic news is real, as the charts of over-the-month employment changes and quarter-to-quarter real growth in GDP illustrate[1].  But, the annual cycle of hope and disappointment is manufactured by influential economists and financial experts who either willfully ignore the flat trend line that cuts through the multi-year cyclical pattern, or worse, aren’t even aware of it.  Ignore the underlying trend line and every fall time spending spree becomes a new “morning in America.”

Instead of pumping up optimism each fall on the basis of positive economic signals that are demonstrably temporary, economists and financial experts should be pointing out that job growth is not accelerating and explaining why the level of job creation remains well below the level needed to restore full employment and grow incomes.  The trouble is, they can’t explain the trend line because it doesn’t make sense in traditional nation-centric models of employment growth.

The cyclical pattern of employment change in the U.S. is influenced by domestic spending, but the trend line around which U.S. employment change fluctuates is greatly influenced by world economic factors.  U.S. employment trends are a subset of global employment trends, which are embedded in global economic processes, investment trends, and spending trends.

The world economy is limping along and recent reports strongly indicate that little improvement will take place over the next couple of years.  GDP growth will be too slow to generate adequate employment growth, so unemployment and underemployment will rise.  In this context it is wishful thinking to suppose that this spring will not bring another round of disappointment about job and income growth in the U.S.


[1] This pattern makes sense given the seasonal pattern of spending by Americans.  The most difficult to resist pressures to spend are concentrated in the last five months of the year, the Season of Spending.  Parents have to pay school fees and buy backpacks, computers, new clothes, and even cars for their children.  During the holiday season, which follows close on the back to school season, spending increases because we all face powerful pressures from family and friends and advertisers, and because many of us have postponed optional spending until the holidays give us dispensation to empty out savings accounts and haul out the credit cards.

The ‘All’ in ‘We’re All in This Together’ Is the Whole World

ITEMS FOR YOUR CONSIDERATION

… that if you just “work hard and play by the rules” you should expect … a decent life and a chance for your children to have a better one. There is just one problem: It’s out of date.

… when Clinton first employed his phrase in 1992, the Internet was just emerging, virtually no one had e-mail and the cold war was just ending. In other words, we were still living in a closed system, a world of walls, which were just starting to come down. It was a world before Nafta and the full merger of globalization and the information technology revolution, a world in which unions and blue-collar manufacturing were still relatively strong, and where America could still write a lot of the rules that people played by.

That world is gone. It is now a more open system.

 Thomas Friedman, New Rules, New York Times, : September 8, 2012.

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Anybody with an idea and a little expertise can set assembly lines in China into motion with nothing more than some keystrokes on their laptop. A few days later, a prototype will be at their door, and once it all checks out, they can push a few more buttons and be in full production, making hundreds, thousands, or more….“Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too.

Voilà, a Factory in Your Garage, Reading File, New York Times, February 6, 2010.

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Both cyclical and structural effects appear evident in the recession, suggesting that some features of the U.S. economy can benefit from stimulatory monetary and fiscal policy, while others are more permanently damaged and unlikely to respond to such policies.

 Eric Swanson, Structural and Cyclical Economic Factors, Economic Newsletter, Federal Reserve Bank of San Francisco, June 11, 2012.

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After all, borders are not impermeable. On the contrary, globalization – the immense flow across borders of people, ideas, greenhouse gases, goods, services, currencies, commodities, television and radio signals, drugs, weapons, emails, viruses (computer and biological), and a good deal else – is a defining reality of our time. Few of the challenges that it raises can be met unilaterally; more often than not, cooperation, compromise, and a degree of multilateralism are essential.

Richard N. Haass (Director of Policy Planning for the US State Department (2001-2003), To the Victors Go the Foils, Project Syndicate, Apr. 25, 2012.

COMMENTS

When there are no limits to competition, competition destroys the commons – whether that commons is arable land, fish stocks in the ocean, the earth’s breathable air, or the economy in which all the world’s working people must earn an income sufficient to support a family and contribute to the well-being of their communities.

Structural factors that rob working people of living wage jobs are not confinedto the U.S., are not confined to any nation. There are national and local variations, but, fundamentally, the structural problems are global in scope and must be addressed through globally coordinated efforts.

A global system in which one nation outdoes others for a few years, and then another nation outdoes others for a few years, while the global trend is greater hardship for the greater number, is not one the American people should want and it is not one in which a high standard of living can be sustained.

Time is Running Out for the “All News is Good News” Spin on U.S. Employment Prospects

ITEMS FOR YOUR CONSIDERATION

Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.

Timothy R. Homan, Employment in U.S. Increased 69,000 in May, Bloomberg, June 1, 2012.

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The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession, according to federal statistics, reflecting the profound and lasting effects that the downturn has had on the nation’s economic prospects. … The percentage of workers between the ages of 25 and 54 who have jobs now stands at 75.7 percent, just a percentage point over what it was at the downturn’s worst, according to federal statistics.

Before the recession the proportion hovered at 80 percent.

Peter Whoriskey, Job recovery is scant for Americans in prime working years, Washington Post, May 29, 2012.

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A gauge of manufacturing in the 17-nation euro zone fell to a three-year low of 45.1 in May, indicating a 10th month of contraction, while unemployment reached 11 percent, the highest on record. China’s Purchasing Managers’ Index dropped to 50.4 from 53.3, the weakest production growth since December.

Simon Kennedy, Global Growth Heads for Lull as Europe Output Shrinks,  Bloomberg, June 1, 2012

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Markit chief economist Chris Williamson attributed the [manufacturing] slowdown to “a near-stagnation of export orders, reflecting deteriorating demand in many overseas markets, notably the euro zone but also emerging markets such as China.”

Steven C. Johnson with editing by Chizu Nomiyama, Weak export demand slows May manufacturing growth: Markit, Reuters, June 1, 2012.

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“We are living in very unusual times,” said Mohamed A. El-Erian, the chief executive of Pimco, the world’s largest bond manager. “History may not be as reliable a guide as it’s been in the past.”

Jeff Sommer, Flights to Safety Can’t Hide the Dangers, New York Times, May 12, 2012.

COMMENTS

Since the official end of the Great Recession, economists, with very few exceptions, have reiterated optimism about U.S. job growth following economic news releases, whether the news was good or bad.  This optimism was and is untenable.

Even after decades of economic globalization, U.S. economists continue to make the mistake of treating nation to nation variations on larger global employment themes as though they are largely autonomous national employment themes.  This mistake leads economists to carry forward into the current era a trust in nation-based economic analysis tools and nation-based economic policy formulations that were developed for an economic era that is all but gone.

Until U.S. economists revise their analytical approach and policy formulations to fit the global economic era in which we all now live, Americans will continue to be fed hopes about U.S. employment trends that are largely destined to be disappointed.

In Bill Clinton’s 1992 presidential campaign the phrase, “It’s the economy, stupid”, was used as a reminder to campaign workers to stay on message.  It became fairly well known outside the campaign and is still occasionally quoted.

Long ago, U.S. economists should have revised that phrase to “It’s the world economy, stupid.”