Dean Baker: Robbed of Jobs by the Deficit Cultists

[marmar]

via CommonDreams:



Published on Monday, June 7, 2010 by The Guardian/UK

Robbed of Jobs by the Deficit Cultists
The latest US jobs report shows how feeble this recovery is. Yet those managing the economy are set on a low-employment path

by Dean Baker


Friday's US jobs report caught most economic analysts by surprise. After touting the strength of the recovery for months, they had to come to grips with the fact that the economy just is not creating very many jobs.

If the temporary jobs generated by the census are pulled out of the count, the economy created just 20,000 jobs in May. The average rate of growth of non-census jobs over the last three months has been just 130,000 a month, only slightly faster than the growth of the workforce. At this rate of job growth, it will take decades, not years, to get back to normal levels of unemployment. It's time that we stop the happy talk about recovery and get serious about the country's economic problems.

Once again, the reason for this downturn is very simple, even if most of the country's top economists were (and are) unable to see it. We saw an $8tn housing bubble and a somewhat smaller bubble in non-residential real estate collapse. This bubble had been driving the economy prior to the recession.

The bubbles directly generated close to $500bn in annual demand by stimulating construction. The housing wealth created by the bubble indirectly spurred another $500bn in demand by lifting consumption. With the destruction of this wealth consumption has now been drastically curtailed. The question is not one of consumer sentiments. Consumers are not spending for the same reason that homeless people don't spend: they lack the money.

The $1tn plus in lost demand is the cause of the downturn and there is no obvious basis for replacing it. The stimulus package pushed a bit more than $300 billion a year into the economy, but close to half of this was offset by cutbacks and tax increases at the state and local level. The negative impact of the state and local actions will intensify after 1 July when most new fiscal years begin. ..........(more)

The complete piece is at: http://www.commondreams.org/view/2010/06/07-8

[proudohioan]

1. Kick, marmar!

Thanks for all your hard work and posts. I always appreciate you and a few others bringing honest and relevant posts to the table.

T.

[chill_wind]

2. K & R. n/t

[KoKo]

3. An Excellent read from Dean Baker...Can't recommend it enough!