Poor economic data has spread to the stock market. Maybe this will finally serve as a wake-up call.
The sudden weakening of the economic recovery is now undermining even the stock market. As usual, however, Wall Street is worried about profits and a possible double dip recession. But what the press and the Obama administration have not adequately taken up is how poor job and wage growth have been, even given the rate of GDP growth. And without more jobs and rising wages, we can forget a strong economy in the future.
It is time to make the record clear, especially as Austan Goolsbee leaves his post as Obama’s chief economist. Goolsbee has spoken about the lack of family income growth being the biggest problem America faces. But there has been no passion in this White House about what is an alarming jobs performance. There has been some job growth in recent months — until May, that is. But overall, the performance is abysmal and simply frightening.
That job growth, like GDP growth, would continue at a satisfactory rate was a wish and prayer for the administration. The inflation mongers, usually Republicans, have been still worse. The dominance of austerity economics in Washington will be seen as a historical folly of the first order. Cutting federal spending now is simply wacky.
Economist Andrew Sum and his group at Northeastern have done a close-up analysis of job and wage data. There has never been an economic recovery since World War II nearly as bad as this one.
Yes, there has been GDP growth, but it has almost all gone to profits, not pay. By most measures, there are still fewer jobs today than there were at the bottom of the recession. Just as disturbing, there has been no increase in wages. There are many measures of wages and salaries, but Sum and his group found that average hourly earnings of all private sector wage and salary workers were unchanged over the seven-quarter recovery. The typical or median full-time worker lost ground over this period. Hours worked grew only slightly.
And as we all know, unemployment remains very high at 9.1 percent. Underemployment — those unable to find full-time work when they want it — has about doubled, growing from 4 million to 8 million American workers.
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For the first time in more than sixty years, aggregate wages and salaries adjusted for inflation did not rise after seven quarters of recovery. What did rise was corporate profits — and sharply. Here’s the stunner, as Sum calculates: Pre-tax corporate profits in 2010 dollars rose by $464 billion and real wage and salaries in 2010 dollars fell by $22 billion.
Job growth out of the 1990-1991 recession was also slow. But not like this. Profits have never been as large a share of the growth of GDP.
This should fire up any Democratic administration. But at a recent presentation at the Harvard Club in NYC, Tim Geithner recently boasted about how much better the American economy recovered than did Europe’s. That’s only true if you don’t look at jobs. And what is an economy ultimately, but jobs?
This disconnect between GDP growth and jobs is the economic issue of our time. Some of the jobs have been off-shored. Much of the slow job growth is due to companies’ refusal to hire new workers because demand is so uncertain (not due to increased regulations). New technologies have a part to play. But it is hard to escape the fact that increasingly, corporations are in a battle with workers to minimize labor costs. Productivity growth is now the result of “efficiencies,” not innovation. “Efficiencies” is now a euphemism for disregard — and sometimes contempt — for workers.
Those of us who took an economics course or two were taught to admire productivity growth. I remember fully believing that increases in productivity were usually accompanied by increases in the nation’s standard of living. This was the capitalist defense of labor-saving machinery — the industrial revolution. Throughout history it often worked, with some substantial help from progressive government programs that started in the late 1800s.
The relationship no longer holds, and government is nowhere to be found. We need more stimulus, an outright jobs creating program, tax incentives to keep jobs here, serious infrastructure and manufacturing investment by the government, and perhaps a reconsideration of free trade policies. As far as I can see, Washington just thinks we will blithely grow our way out of this.
Stock prices went up rapidly in this expansion along with profits. Maybe that’s what makes Washington complacent on the jobs issue and turns its focus to budget balancing. As for the press, big finance also dominates their thinking. Now stock prices have been falling. This may prove the only wake-up call Washington can’t ignore.
Roosevelt Institute Senior Fellow Jeff Madrick is the author of Age of Greed.
4 Comments
Barack and his party do not care about the common man.
Instead of adding either more taxes or borrowing, why not claw back all existing government loans (TARP, the car companies, AIG, GE, etc.) that have not yet been paid back.
The hundreds of billions that were used to prop up failed, insolvent, and ineptly run banks/corporations would provide both the funds for jobs programs and infrastructure projects.
Jeff,
Big government cannot be a solution when there are too many of its crony’s (including the Democrats) wasting trillions (and saving Wall Street and the bankers/corporations that had failed was an exceeding waste) and pretending there is economic growth and recovery.
Barack and his party are vile liars. The empty suit filth throwing their hats in the ring from the other party are equally degenerate.
When does ND 2.0 wake up and realize that the Nobel peace prize winner is a failed, wretched servant of the wealthy or more succinctly “A black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats”? When he starts a fourth war? Oh, sorry, too late. He already has (covert action in Yemen).
Posted by chris cunningham | June 9th, 2011 at 4:21 pm
A permanent reserve army of the unemployed. Heaven.
Posted by cfaman | June 9th, 2011 at 10:33 pm
Mascot. That says it well. Jeff, if the “summer of recovery” didn’t do it for you last year, what fuels the politician’s fantasy that more fed pumping of paper assets would turn the faux recovery into the real thing?
Posted by Red Bubba | June 9th, 2011 at 10:59 pm
I read the Sum, et al, report. Amazing. Corporate profits accounted for 92% of the growth since the end of the Recession. (See the last several pages for a summation) Aggregate wages and salaries have not increased, but dipped a little since the recession’s end. Hours worked, weekly pay, have not moved much. The same GDP level as in late 2007, after falling 4.2%, but about 7 million less workers. Since Nov. 2009 one in four children get their food through food stamps, and it is now about 30% with the continued growth in SNAP participation. One in seven Americans, 14%, over 45 million. This report should hit the main stream media. Yet there is nothing that will shake things up. We’re stuck with complacency. Not until the NYSX crashes — but why should it?
Posted by Ben Leet | June 10th, 2011 at 1:54 am
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Poor economic data has spread to the stock market. Maybe this will finally serve as a wake-up call.
The sudden weakening of the economic recovery is now undermining even the stock market. As usual, however, Wall Street is worried about profits and a possible double dip recession. But what the press and the Obama administration have not adequately taken up is how poor job and wage growth have been, even given the rate of GDP growth. And without more jobs and rising wages, we can forget a strong economy in the future.
It is time to make the record clear, especially as Austan Goolsbee leaves his post as Obama’s chief economist. Goolsbee has spoken about the lack of family income growth being the biggest problem America faces. But there has been no passion in this White House about what is an alarming jobs performance. There has been some job growth in recent months — until May, that is. But overall, the performance is abysmal and simply frightening.
That job growth, like GDP growth, would continue at a satisfactory rate was a wish and prayer for the administration. The inflation mongers, usually Republicans, have been still worse. The dominance of austerity economics in Washington will be seen as a historical folly of the first order. Cutting federal spending now is simply wacky.
Economist Andrew Sum and his group at Northeastern have done a close-up analysis of job and wage data. There has never been an economic recovery since World War II nearly as bad as this one.
Yes, there has been GDP growth, but it has almost all gone to profits, not pay. By most measures, there are still fewer jobs today than there were at the bottom of the recession. Just as disturbing, there has been no increase in wages. There are many measures of wages and salaries, but Sum and his group found that average hourly earnings of all private sector wage and salary workers were unchanged over the seven-quarter recovery. The typical or median full-time worker lost ground over this period. Hours worked grew only slightly.
And as we all know, unemployment remains very high at 9.1 percent. Underemployment — those unable to find full-time work when they want it — has about doubled, growing from 4 million to 8 million American workers.
Sign up for weekly ND20 highlights, mind-blowing stats, and event alerts.
For the first time in more than sixty years, aggregate wages and salaries adjusted for inflation did not rise after seven quarters of recovery. What did rise was corporate profits — and sharply. Here’s the stunner, as Sum calculates: Pre-tax corporate profits in 2010 dollars rose by $464 billion and real wage and salaries in 2010 dollars fell by $22 billion.
Job growth out of the 1990-1991 recession was also slow. But not like this. Profits have never been as large a share of the growth of GDP.
This should fire up any Democratic administration. But at a recent presentation at the Harvard Club in NYC, Tim Geithner recently boasted about how much better the American economy recovered than did Europe’s. That’s only true if you don’t look at jobs. And what is an economy ultimately, but jobs?
This disconnect between GDP growth and jobs is the economic issue of our time. Some of the jobs have been off-shored. Much of the slow job growth is due to companies’ refusal to hire new workers because demand is so uncertain (not due to increased regulations). New technologies have a part to play. But it is hard to escape the fact that increasingly, corporations are in a battle with workers to minimize labor costs. Productivity growth is now the result of “efficiencies,” not innovation. “Efficiencies” is now a euphemism for disregard — and sometimes contempt — for workers.
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