Have Yourself a Merry Little Christmas
Robert Reich, one of the few economists around who makes sense, asks if it is time to call it a depression.
Today’s employment report, showing that employers cut 533,000 jobs in November, 320,000 in October, and 403,000 in September — for a total of over 1.2 million over the last three months — begs the question of whether the meltdown we’re experiencing should be called a Depression.
We are falling off a cliff. To put these numbers into some perspective, the November losses alone are the worst in 34 years. A significant percentage of Americans are now jobless or underemployed — far higher than the official rate of 6.7 percent. Simply in order to keep up with population growth, employment needs to increase by 125,000 jobs per month.
As Ron Popeil says “But wait. There’s more!”
Note also that the length of the typical workweek dropped to 33.5 hours. That’s the shortest number of hours since the Department of Labor began keeping records on hours worked, back in 1964. A significant number of people are working part-time who’d rather be working full time. Coupled with those who are too discouraged even to look for work, I’d estimate that the percentage of Americans who need work right now is approaching 11 percent of the workforce. And that percent is likely to raise.
Economics isn’t my area but he makes it plain. Jobs are disappearing. Those that remain are paying less. Much of the workforce is joining the ranks of the long-term unemployed. Beyond the human need for a way to pay bills and buy food, this level of unemployment tanks what is left of the economy. People can’t affort to buy goods and services. More people are laid off, small businesses close, causing more unemployment. We are entering the era of a downward spiral — what Reich called falling off of a cliff.
He argues that we need two things immediately: a bailout of actual businesses commonly referred to as ‘main street’ instead of the financial industry and a very large stimulus package. Reich again
the massive Treasury bailout of the financial industry must be redirected toward Main Street — loans to small businesses, distressed homeowners, and individuals who are still good credit risks. Second, a stimulus package must be enacted right away. It needs to be more than $600 billion — which is 4 percent of the national product. It should be focused on job creation in the United States — infrastructure projects as well as services. Construction jobs are critical but so are elder care, hospital, child care, welfare, and countless other services that are getting clobbered. Service businesses accounted for two-thirds of the job cuts in November, meaning that the weakness in labor markets has shifted from the goods-producing sector of the economy to the far larger services.
Look, I loathe the notion as much as anybody who distains Mr. Bush does, but I am forced to conclude that our loathing of the Bush years shouldn’t cause us to be pennywise and pound foolish. The sooner we get this done, the sooner we can get on with other things, including electing more Democratic senators in 2010.
Posted: December 5th, 2008 under Economics.
Comments: 6
Comments
Comment from John McCreery
Time: December 6, 2008, 4:01 am
Reich isn’t the first or the only one to use the expression “falling off a cliff.” Our latest Noble Prize-winning economist Paul Krugman used the same expression on December 2.
It is, however, probably too late for anything dramatic to be done until we are through the New Year and get Obama inaugurated. Earliest possibility will be when the new Congress starts up on, what is it?, I believe January 6.
Until then, it’s buckle your seat belts.
Comment from Sasha
Time: December 6, 2008, 6:35 am
I the new Congress actually has legislation on his desk on January 20. That would be a pleasant change. And the notion that something might be done would be refreshing.
Comment from Josh Hammond
Time: December 6, 2008, 7:40 am
Robert Reich is one of my favorite thinkers out there. If he were six feet tall, he’d be a contender. I find him much more creative than Krugman.
The only big problem here is that Obama’s still sketchy plan for 2.5 million jobs in two years is puny compared to the need. This number will barely cover the recently unemployed mentioned by Reich. There are about 5 million folks who need jobs, now, not in two years. This is one campaign promise he should build on with more urgency. It’s not enough to say “I did more than Bush did”. He needs to it much bigger. Remember how Bush with no electoral mandate marched into Washington and rammed his still lingering tax cut down the Dumbos throats? That was a 10 year plan and Obama is just talking two years.
Comment from timr
Time: December 6, 2008, 10:12 am
Is it time to resurrect the FDR playbook? Get a new CCC going? Can’t do a TVA to electrify the south, but how about a TVA like project to get broadband to everyone. My fear is that we are heading for a brand new worldwide depression. Is history going to repeat itself? Further question. Will the greed heads on wall street be made to pay? I am thinking that it might be time for the villagers(not members of the DC village) to get out the pichforks and hanging ropes if the fedgov will do nothing to punish those who got us into this. Have read extensive history on the 20s and 30s, this sure is looking like a repeat of that era. This is what happens when hubris strikes the big money people and they convince the congress to dismantle all of the safeguards that were put in place way back when to prevent the depression from happening again. With our K-12 education system in tatters-Q. of the chicken or egg type. Did the NCLB cause or accelerate the dismantleing of what was 100 years ago a very good school system back when a HS diploma ment something-I recently attempted to take a HS test from 1896. A very humbling experience, I could not answer 1 in 20 questions. No multiple choice, all required a written answer. And I thought that my K-12 education was pretty good back in the 60s. I think that we need to have a very vigorous debate about what we should expect out of our schools and I further believe that Depts od Education at the university level deserve much of the blame in the continuing degradation of our public schools(the US isw not even in the top 20 countries when it comes to educating our children. WTF have we done to ourselves? Is this the decline and fall of the new roman empire, with the US playing the part of the romans? If the entire fedgov goes bankrupt then I will start to worry.
Comment from Bob
Time: December 6, 2008, 10:13 am
There is an economist teaching in New York you guys should check out, Nouriel Roubini. With very few exceptions this guy has been on the mark for the last 3 years or so. Things are unfolding in a manner he said they would. Naturally the Wall St. and business elite and their friends in the media thought this guy was off his rocker - not so. I don’t let a week go by without checking out the latest from him.
As for Obama, not only is he dealing with a horrible hand dealt to him by Bush, he also has to deal with an economy which has been in denial for the last 8 years. There are no quick fixes for this. Our standard of living will plunge to depths we didn’t think possible as we pay the piper for a standard of living acquired only through massive amounts of debt - both public and private. In other words, we having been living on an economic foundation made entirely of quicksand.
Comment from Sasha
Time: December 6, 2008, 11:33 am
Well timr it looks like you called it. The Politico reports
President-elect Barack Obama added sweep and meat to his economic agenda on Saturday, pledging the largest new investment in roads and bridges since President Dwight D. Eisenhower built the Interstate system in the late 1950s, and tying his key initiatives – education, energy, health care –back to jobs in a package that has the makings of a smaller and modern version of FDR’s New Deal marriage of job creation with infrastructure upgrades.The president-elect also said for the first time that he will “launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen.”
“We will repair broken schools, make them energy-efficient, and put new computers in our classrooms,” he said in the address.
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