Jobless Recovery: Good for Absolutely No One

The LA Times leads today with the likelihood that we will have another jobless recovery, following those of 1990-91 and 2001 (http://www.latimes.com/business/la-fi-jobless-recovery2-2009jul02,0,4591258,print.story). Many jobs have been permanently lost, consumer spending is unlikely to truly recover in the short run and employers will probably increase hours for those who are lucky enough to have kept their jobs before they actually hire anyone new. Two points should be made about this recovery though. First, the magnitude of unemployment is different here – currently hovering at 9.4% and expected to top 10% next year. The reality is that the U.S. has been underreporting both unemployment and inflation since the 70s and the situation is thus even worse than it appears. Second, these jobless recoveries point at a more fundamental problem in the U.S. economy today – namely the lack of quality jobs and consumer spending. The latter has been the driving force of the American economy for some time, but with credit dried up, underpaid and underemployed (or unemployed) Americans can no longer afford to spend money they don’t have. While the recovery will implicitly lead to a rise in GDP, it is unclear that it has done much to address this central problem with the economy today. This is particularly true given the fact that we have permanently lost high paying jobs on Wall Street and among the most well-paid blue collar jobs (in the auto industry). It is further amplified by those who are underemployed (working part-time, without benefits or in jobs they are overqualified for). The large temporary workforce and outsourcing that have grown in recent years increase insecurity and the tenuous line between financial stability and crisis for far too many Americans.

The fundamental issue is the unequal distribution of costs and benefits in society. Since the 70s, the income gap between rich and poor has been increasing and the U.S. economy has continued to grow primarily because of unrewarded productivity increases that have largely gone to the top of the economic ladder and spending far into debt by everyone else. This is unsustainable in the long run. Obama talked about addressing this fundamental issue during the campaign, but beyond rhetoric has done little to really confront the central problem – i.e., government must intervene to ensure more equitable distribution. In fact, the relief and recovery act has done more to exacerbate the problem, by alleviating the risk associated with prior bad decisions for those at the top of the economic ladder while doing little to help the disempowered victims of those decisions. In the long run, this is the only way to have a real recovery that will benefit the average American.