Jobs: What The President Won't Tell You
When President Obama talks about the economy at today's White House news conference, here's what he won't say: we're screwed on job creation for a while. Instead, he'll say that the combined $180 billion in new infrastructure and investment plans (don't call it "stimulus"!) will inject a shot of adrenaline into the nation's sagging economic recovery, help address the nation's long-term needs and spur job creation.
I doubt that the proposals will create jobs, but that's nothing new. While the economy has recovered from the depths of the Great Recession in many ways, the job situation simply stinks. While each of the initiatives may be worthy, they don't address a simple fact: businesses hire when increased demand for goods or services forces them to do so. That's clearly not the case in today's economy.
To make myself feel better about this fact, I talked to a few economists who reminded me that job creation is usually the last part of the recovery--that was the case after the two last recessions. Perhaps of greater significance, the US labor market has been shifting under our feet for at least a decade. Private employment today stands at about the same level as 1999 due to technological advances, globalization and corporate outsourcing. All of these factors have increased the efficiency of the world economy, leading to a huge rise in corporate profitability, at the expense of job creation in the US.
So, who benefited from that spike in profitability? In econo-speak, we say that the money went to capital owners, but James Surowiecki of The New Yorker spelled it out more clearly: that money went to the very wealthiest Americans. He notes that between 2002-2007, "the bottom ninety-nine percent of incomes grew 1.3 percent a year, in real terms-while the incomes of the top one percent grew ten percent a year."
It's just like my grandfather used to say, "it's the Golden Rule-those with the gold, rule!"
Or to be less sassy, what we know is that over the past two decades, the economy became seriously distorted. Many American consumers spent money not based on what the earned, but by using easy credit or tapping their homes like ATM machines. That spending binge is over, and in the future things are going to move more slowly. This hurts in the short-term, but is essential if we are to restore the basic foundation of the US economy.
Image by Flickr User JoshBerglund19, CC 2.0
