Little demand left in our economyMarch 6, 2004

March 6, 2004



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Little Demand Left in Bush's Economy


Bush's jobless recovery shows no signs of boosting employment any time soon.


The figures for February were dismal, with the economy adding just 21,000 jobs. Those were primarily temp jobs.


And while the unemployment level held at 5.6 percent, that was only because "the number of labor force participants fell steeply last month, by 392,000," the Economic Policy Institute notes. That is an enormous number of discouraged workers (those not counted as officially unemployed), and it is "presumably due to the lack of available jobs," the institute said.


"Our country's leaders are oblivious to the suffering of the unemployed," said John Sweeney, head of the AFL-CIO, who noted that Bush will not extend unemployment benefits and has already taken away overtime pay from millions of American workers.


Business executives are blunt. They don't care about hiring new workers. In fact, doing so is against their interests.


"The goal of companies is not to hire," Larry Geiger, a vice president of the American Management Association, told Louis Uchitelle of the New York Times. Explained Uchitelle: "The executives are focused instead on fattening profits to push up stock prices. . . . They are doing it by suppressing labor costs--getting more output from the existing work force."


By squeezing current employees, businesses also keep their health care costs down. If they don't hire new workers, they don't have to pay the added cost of covering them.


The current economy is unique in the annals of post-Depression American capitalism. Every recovery except this one since 1945 has netted jobs 35 months after a recession began. Bush's economy has lost 2.2 million jobs.


What's more, the length of time people are out of work is almost at a record level. The average today is more than 20 weeks. That is brutal.


Not only is unemployment high and long, but wages are flat. In fact, for blue-collar workers and low-ranking service employees, wage increases are "up only 1.6 percent the past year--the weakest growth rate since 1986," the institute says. "Many workers are falling behind in real terms."


These statistics are devastating in human terms. And they spell trouble for Bush politically and economically.


On the political side, he may lose the crucial state of Ohio, for instance.


And economically, the statistics suggest that aggregate demand may fall off. The combination of high unemployment, low wages, and rising oil prices will leave millions of American workers with little disposable income.


And Bush is left with very little he can do to create jobs. He has already dished out the child tax cut, he has let the rich raid the candy store, the refinancing boom has little steam left in it, and he is allergic to public spending on anything but the Pentagon.


So where is the demand going to come from to keep this economy going?


Bush has made his choices, and now he has to live with them.


Unfortunately, so do millions of Americans who are suffering as a result.

-- Matthew Rothschild

link:

http://www.progressive.org?webex04/wx030604.html/

It's scary stuff. There seems to be a pattern that we are picking up.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x6839

get the memo that without Bush's leadership, we wouldn't have created so many jobs?

It is truly midnight in America.

"The goal of companies is not to hire," Larry Geiger, a vice president of the American Management Association, told Louis Uchitelle of the New York Times. Explained Uchitelle: "The executives are focused instead on fattening profits to push up stock prices. . . . They are doing it by suppressing labor costs--getting more output from the existing work force."

This is the crux of the problem and there isn't an easy solution. What usually happens is that a rising economic tide lifts all boats as employment and incomes increase due to high labor force utilization. But this "recovery" is fueled with oceans of debt, "juiced" demand if you will. At some point, without income growth, savings, and new job creation, consumer demand will not be able to be sustained. The Bushistas are already running massive deficits (read public sector stimulus) and most companies are structurally far more efficient than they used to be. They can meet demand without hiring workers.

With the growing wealth concentration, the rising corporate profits are not flowing throughout the system. Ergo, total demand is far more fragile. Transactions velocity will be impacted.

In some respects, outsourcing, while contributing to the problem, is not the whole enchilada that many make it out to be. It is more symptomatic than causal. Take a look at the massive productivity increases of the last 5+ years to get a greater sense of what growing efficiencies mean to total labor demand. This employment swoon is the inevitable outcome of large technology investments which necessarily yield better production efficiencies in both goods and services.

In the long run the answers may lie in less obvious solutions such as shortening the work week, getting health care costs under control, taking steps to widen wealth distribution through far greater labor ownership of businesses. These symptoms need to be addressed structurally, holistically rather than with the band-aid approach currently being used. That means talking about forbidden issues such as class, institutional reform, the rights and responsibilites of citizens in a civil society.

There are no easy answers here. This requires an honest conversation, sorely lacking in the polarized, charged environment wrought by 20 to 30 years of political scapegoating.

The Tsunami has just begun to form.

O