The August jobs report showing no new jobs created is not surprising. The U.S. economy has been slowing all year. But, as Heidi Shierholz, labor economist at the Economic Policy Institute, said, “Though much attention is being paid to ‘zero job growth’ in August, the real news in today’s numbers is that job growth is worse than in recent months, and the nation continues to produce far fewer jobs than needed to meaningfully reduce the unemployment rate. In fact, in some ways the report was less than zero in that weekly hours fell, as did hourly earnings.”
Employers are not refusing to hire because of “onerous” regulations or taxes. The regulatory regime is largely unchanged from the Bush years, aside from the health-care overhaul whose affects are mostly to enrich the big insurance companies. And a decade of tax cuts hasn’t created many jobs. I’ve written before about the real causes. The question is what to do?
What should not be done is the austerity pushed by the House and accepted by President Obama. This guarantees huge numbers of additional layoffs from government, not only at the federal level but at states and localities as the too-small Obama stimulus runs out. It makes a double-tip much more likely. We don’t have a short-term federal debt crisis. We do have an immediate and persistent jobs crisis, unlike anything seen since the Great Recession, and one that promises to do lasting damage as it drags on for years.
The president should propose a large new stimulus aimed at job creation. This should be heavily focused on infrastructure, and not just “roads and bridges,” but building real high-speed rail, improving Amtrak, retrofitting suburbia with transit for a high-cost energy future, improving freight-rail capacity with public-private partnerships, and rebuilding our national commons, from parks to schools. This is real Keynesian economics and it was the only thing that relieved suffering and joblessness in the Depression, as well as leaving behind a productive infrastructure we still use today. Small-ball, such as payroll tax holidays, won’t work.
It’s a great time for Washington to borrow: Interest rates are near zero and we borrow in our own currency. Only with major stimulus will the economy eventually grow enough to start paying down the debt. We must also push for new balance and fairness in trade with Asia, but that’s a topic for another post.
Republicans are counting on blocking any Obama initiative to bring down his presidency. To be fair, congressional Democrats did much the same to Herbert Hoover. And in both cases, the chief executives were timid and captured by the conventional wisdom and the powerful moneyed interests. If Obama had a different temperament, he would propose this jobs plan and dare the House to block it. If that happened, he would run against a “do-nothing Congress” and make it the centerpiece of his campaign. But he’s no Harry Truman.
America is not helpless. The remedies are clear and tested by experience. All that’s lacking is leadership and will. In the meantime, more Americans will suffer.
Today’s Econ Haiku:
When playing Monopoly
Watch out for Chance cards