The October jobs report shows the U.S. economy continues to recovery, but, as this chart from the Calculated Risk web log shows, at a much slower rate than previous post-war economic recoveries.
Since the 1970s, each economic recovery has been weaker than the previous one, with slower growth in jobs and hourly wages at a lower rate than in the previous recovery. But in my opinion, the reason the 2007 recession is so much worse is the 2008 Wall Street crash, signaling the unsustainability of an economy based on debt and speculation rather than borrowing.
Here are some more charts, also from Calculated Risk, which show the state of the U.S. economy in the light of the latest job report.
The lower chart, which shows the proportion of the population in the labor force and the proportion with jobs is probably a better measure of the employment situation than the unemployment rate, which is the percentage of the population looking for jobs who can’t find jobs. You should notice that the bottom line on the chart is not zero, which means that the variation at first glance seems greater than it really is.
The job losses in the recession were mainly well-paying, middle-class jobs, and the job gains are mainly low-paying, less desirable jobs. And while any increase in jobs is good news, the rate of job growth is barely enough to keep up with growth in the population.
I think President Obama deserves some credit for the fact that things are not even worse than they are. I think his stimulus program helped, and, while I disagree with the way the bank bailout was handled, I think the recession would have been far worse if the administration had stood idly by and let nature take its course. Here is another Calculated Risk chart, which compares the current U.S. recovery with the Great Depression of the 1930s in the United States and with other nations which have gone through financial crises in the past few decades.
What this chart shows is that the financial crisis in the United States could easily have been much worse than it was.
Unfortunately, the Obama administration failed to take action to prevent a future financial crash. It declined to prosecute for financial fraud nor to restructure failed financial institutions, as was done in the aftermath of the savings-and-loan crisis. Obama’s administration worked pro-actively to prevent legislation that would break up the too-big-to-fail banks or to take meaningful action to limit speculation with federally-insured bank deposits. As a result, the Wall Street financiers who were responsible for the financial crash, except for the executives of Lehman Brothers, wound up better off than they way before.
The predictable result of this will be another financial crash, a bigger and worse one than the 2008 crash. I am not smart enough, or foolish enough, to say when this will be, but when it happens, it will be a political disaster for whatever political party happens to be in power at the time.
The broader problem is that the United States has slower economic growth than in the 1950s and 1960s, and an increasing share of the benefits of that growth are going to a tiny minority of the population. I think both trends are the result of the globalization of the national economy. To some extent, slower economic growth and wage stagnation are the result of the leveling of the playing field between American workers and workers in Latin American and eastern Asia. I don’t complain about this. It would be shameful to try to maintain my high material standard of living by trying to keep people in other nations poor.
The other aspect of globalization is that the world’s economic elite have the means to escape regulation and taxation, and that international economic institutions—the World Trade Organization, the International Monetary Fund, the European central bank—operate to protect the interests of financial institutions and the economic elite from national governments. I can imagine an alternate globalization in which international institutions work to raise labor and environmental standards, but at present workers and scientists are not in charge.
I wouldn’t expect Barack Obama to be able to change the situation all by himself, although I think a President is in a good position to raise awareness of the problem. Nor do I think that Mitt Romney offers a better alternative. His Bain Capital is part of the problem. Change, if it comes, will have to come from an aroused public opinion.
Click on Calculated Risk: October Employment Report for a more complete analysis of the latest Bureau of Labor Statistics report.
Click on Modest Jobs Growth in Latest Economic Report for a more readable and less technical analysis by the New York Times.