Waiting For Another Recession In The Spring

Some experts raised the issue of how long the recovery can last as unemployment went over 10% last week and the total number of people out of jobs or looking for full-time work topped 17% of the able-bodied population. It is a very reasonable question. The term “double dip” recession is still thrown around daily by economic pessimists. Their optimistic counterparts believe that American exports will pick up because of less expensive domestic labor, a weak dollar, and the recovery of consumer spending in large developing nations like China. Businesses will begin to restock inventories because they are at historic lows and the firms, especially retailers, cannot be caught short on supplies if there is a surge in customer buying, for whatever reason. But, the most impressive argument for better GDP numbers near-term is that the federal government has bought them with its $787 billion spending package.

The AP made two points which are not part of the normal conversation about the life of the average American worker. The last time unemployment went above 10% people had about a third of the level of debt that they do know and it took ten weeks less time to find a job once a person lost his previous one back in 1982. A number of economists have already described the most devastating part of the employment issue, which is that there are very few jobs compared to the number of job seekers.

The stimulus may was set up wrong at the outset. It gives money to people through the tax system and invests in the national infrastructure, but has no central part that simply promotes hiring. The first draft and all later versions of the program never contained plans to give businesses immediate capital to add jobs and more federal government employment programs under which the US would hire people directly. Those approaches were probably the only way in which the rapid job losses were going to be arrested quickly.

The Administrations has said that its stimulus has already created close to 700,000 but that number has been challenged by skeptics with university degrees in statistics. It is an impressive number even if it is a bit high because so little of the stimulus package has a direct bearing on job creation.

It is too late to go back and rewrite the bill now and that leaves the government, business, and the average working citizen a time to sweat out the fourth quarter retail season and the crush of lay-offs that seems to have returned as large corporations try to improve their prospects for better earnings next year. Workers who are worried about their jobs still cling to the hope that their employers will need at least a minimum number of people to run their businesses. That is true until the companies fail altogether. That happened more and more often at small firms that do not have access to capital to see them through the recession run out of money even if they have promising prospects.

There will be another period of GDP contraction, perhaps as early as the second quarter of next year, if no one goes shopping this year and exports to US trading partners do not improve quickly. The size of the stimulus package seems huge, but compared to annual American GDP of $14.4 trillion it is very modest.

What frightens people who are still in the work force is that their fates are almost completely beyond their control. The money that they paid to the government in taxes does not seem to be buying them any substantial benefit because so much goes to the defense budget, Social Security, Medicaid and Medicare. To add insult to injury, a lot of tax dollars go to pay the interest payments on the national debt. There is still a little money left over after all of those fixed federal costs, but the money is not being used to build concrete programs to get people jobs which will pay their basic living expenses.

Brother can you spare a dime?

Douglas A. McIntyre