07/11/11 Paris, France – The fight for recovery is over. The feds have waved the white flag. Maybe…
The Labor Department came out with the latest employment numbers last week. They were atrocious. Only about a fifth as many new jobs as economists expected. Which shows you three things.
First, economists can’t really predict levels of employment, growth, prices, or anything else. And they are especially bad at it when they have the wrong idea of how things work.
Second, the feds have failed. They have been completely unable to make any progress against the downturn.
Third, this is not a recovery. Widely reported in the media was the opinion that the employment numbers were ‘disappointing for the second year of a recovery.’ Well…yes. Because it’s not a recovery. It’s a Great Correction. And this is just what you’d expect.
For the last 4 years – since the beginning of the financial crisis in ’07 to today – economists, analysts, investors and policymakers have had the wrong idea. They thought they were dealing with an ordinary (though perhaps severe) recession, which they thought would be followed by an ordinary (though perhaps weak) recovery.
Not at all! It was not an ordinary post-war recession. So, the ordinary counter-cyclical policy measure – more credit! – didn’t work. This time, the economy already had too much credit. Which is to say, too much debt. It didn’t do any good to add more debt. Households were already drenched in it.
They couldn’t absorb any more. They couldn’t increase their spending by borrowing more money. So, spending couldn’t go up…
Instead, households are struggling to maintain their standards of living in the face of rising consumer prices and flat…or falling…incomes.
And now, the mainstream financial press is finally catching on. Heck, even the US Secretary of the Treasury, Tim Geithner, may be opening his eyes.
Yes, dear reader, Mr. Geithner appeared on Meet the Press over the weekend and surrendered. He told the world that Americans faced a tough economy and that it would “feel very hard, harder than anything they’ve experienced in their lifetime.”
He’s probably right about that. But we can’t help but wonder: how does he know? Until now, he has not had a clue. What happened? Did he see a burning bush on the road to Damascus? Did he get hit in the head by a rock? Has he come around to The Daily Reckoning point of view? Or is it a set-up?
After telling the world that he and his colleagues saved the world in the crisis of ’07-’09…and then, that their bailouts and subsidies would bring a recovery…Geithner seems to be admitting defeat.
Surely, if there were something he could do, he would do it, right? So, this must mean that Geithner and company have come to the same conclusion we have…that there is really nothing that can be done. They should back off and let nature take her course, right?
Don’t count on it, dear reader. Instead of learning something…that is, instead of admitting defeat, we suspect the feds are up to something. They’re preparing the public for the next election. They will tell voters that they face tough times; they will spend more money trying to turn the situation around. Then, any improvement, no matter how slight, will be regarded as a major triumph.
Here is the report on the latest unemployment numbers in The New York Times:
Fourteen million, in round numbers – that is how many Americans are now officially out of work.
Word came Friday from the Labor Department that, despite all the optimistic talk of an economic recovery, unemployment is going up, not down. The jobless rate rose to 9.2 percent in June.
What gives? And where, if anywhere, is the outrage?
The United States is in the grips of its gravest jobs crisis since Franklin D. Roosevelt was in the White House. Lose your job, and it will take roughly nine months to find a new one. That is off the charts. Many Americans have simply given up.
But unless you’re one of those unhappy 14 million, you might not even notice the problem. The budget deficit, not jobs, has been dominating the conversation in Washington. Unlike the hard-pressed in, say, Greece or Spain, the jobless in America seem, well, subdued. The old fire has gone out.
In some ways, this boils down to math, both economic and political. Yes, 9.2 percent of the American work force is unemployed – but 90.8 percent of it is working. To elected officials, the unemployed are a relatively small constituency. And with apologies to Karl Marx, the workers of the world, particularly the unemployed, are also no longer uniting.
The article goes on to cite – with apparent approval – the efforts of labor unions and President Roosevelt at combating unemployment during the ’30s.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Four years down. Twenty or so to go.
It has become abundantly clear that the sole purpose of the United States government since 1913 has been to extract wealth from the people and transfer it to the Banks. Everything else political is a distraction.
A more accurate NYT assessment would be efforts of labor unions and President Roosevelt at [maintaining] unemployment during the ’30s.
The rate of unemployment was stuck at 13% at the time of the Pearl Harbor attack.
The number must be false! haha!! Seriously…Thats one of the headlines I’ve seen…
Does anyone happen to find it amusing that there is absolutely no discussion of whether the US should be borrowing more $$ ie, “raising the debt ceiling?” Does it bother no one that the US defaults or can’t pay its bills if it can’t borrow any more? What “normal” citizen or entity could live like that?? Also…does anyone seriously think that the debt ceiling wont be raised? I mean, how does the media keep getting away with such infantile content??
“It has become abundantly clear that the sole purpose of the United States government since 1913 has been to extract wealth from the people and transfer it to the Banks.”
“the banks” sounds so impersonal. you mean, certain people who use banks to acquire wealth. who are these people? anyone in particular, or just whoever happens to be there at any given moment?
Deleveraging will take sometime.QE 1 and 2, government stimulus has soften the blow and avoided a full fledge depression.The Great Correction still has years to play out.Sadly, economic growth and stubborn unemployment will persist until the baby boomers leave the workforce, die or retire.
I am an RN who left his job in the spring of 2010 to take care of an ill wife. At that time I was not worried about finding another job later, after all the last time I looked for work I had no less then 5 job offers to choose from, that was in the spring in 2008. I went looking for a job this last march. It took four months and the only offer i received was for part time work, I accepted of course. When a health care provider has such a difficult time finding work you know things are bad out there. The idea that a recovery has occured is a big fat lie. Nursing homes and hospitals are all working more shorthanded then usual, they are hiring unqualified personal to take the place of the profesional nurses they are not hiring. Nursing aides are performing tasks and procedures once left to Nurses only. This is not the time to be sick or put anyone you love at risk in a Nursing Home. Just a warning.
I agree there never was a recovery; all one had to do was look around to know that. Every one of my friends (myself included) is having difficult paying bills. Inflation has been rampant for two years now (not that the media or the gov’t admit it).
If all we have been experiencing is a “jobless recovery” for the last decades, along with stagnant wages, a consumer economy cannot survive. Nor do I expect the politicians (mostly the Republicans) to do a damn thing about it.
Will anyone speak the truth about the real number of unemployed, or is this U-3 scam going to go on forever? Unemployment is not 9.2%. The U-6, calculated by the government, stands now at just under 16%. If all those not working, or those doing fill-in jobs, or those who have given up were really counted, the true number of unemployed would be over 22%.
It never helps to give cover for false government numbers just because the entire mainstream press does so.
There is a huge difference in 15 million out of work as opposed to 30 million plus.
“Did he see a burning bush on the road to Damascus?”
Kinda mixed your stories with that one.
BillNM,
Did you not even read the article? Not only was the unemployment (government manufactured U-3) sited here as an example, but it was played down as a non-consequence. I only commented because I’m tired of good writers quoting false information about this subject. Real unemployment numbers are easily available, and using fake numbers because they are mainstream is not good enough.