“We might be witnessing the mother of all jobless recoveries.”
That’s how economist Bernard Baumohl described today’s jobs report to the New York Times.
While there were “only” 345,000 jobs lost last month–as compared to504,000 in April–the report doesn’t account for the upcoming joblosses as well as the ripple effect that will result from the GMbankruptcy. Nor does it reflect the severe budget shortfalls statescontinue to face. It did, however, reveal a continued collapse of wage growth, the highest unemployment rate in 25 years, and the loss of 156,000 manufacturing jobs.
Economic Policy Institute economist Heidi Shierholz writestoday, “It is only in the midst of a historically steep recession thatlosing 345,000 jobs in a single month is actually taken as a goodsign…. The US labor market is still hemorrhaging jobs. With thecontinued loss of jobs and hours along with the collapse of wage growth,it is time to start thinking very seriously about additional stimulusspending.”
In fact, the Center for Economic and Policy Research (CEPR) ismaintaining an “honor roll” of economists who have called for another stimulus “in an effort topromote forward thinking…and challenge those who have not yet facedup to the severity of the current recession.”
“Many mainstream economists missed the housing bubble at the root of thecurrent crisis and many have been slow to call for an additionalrecovery package,” CEPR Visiting Scholar, Eileen Apellbaum, told me. “In the absence of a third economic stimulus, job loss is likely toexceed half a million jobs a month through the rest of this year andpossibly longer. Pain for workers will continue to mount, and the budgetproblems of states will worsen…. A third stimulus is the best chanceworking families have for weathering this economic crisis.”
Appelbaum’s absolutely right about the fiscal outlook for states. TheCenter on Budget and Policy Priorities reportsthat “new mid-year FY2009 shortfalls of $60 billion have opened up inthe budgets of at least forty-two states and the District of Columbia.” (Thatdoesn’t include the initial $48 billion in shortfalls that these andother states faced when they originally adopted their budgets for thecurrent fiscal year.) Also, forty-six states project deficits for the upcomingfiscal year–initial estimates project a $133 billion shortfall. Without additional help, we will see more layoffs, furloughs, and cutsin vital services that will only deepen economic hardship.
As economist and Nation contributor, Jamie Galbraith, wrote me in ane-mail: “This crisis is, above all, a crisis of unemployment, offoreclosures, and–as we see in California–of the essentialservices, including healthcare, that state and local governmentsprovide. None of these will be remedied fast enough by the stimulusalready in the pipeline. New, stronger, better targeted andfaster-acting measures are needed, including general revenue sharing, anational infrastructure fund, a housing program and publicly-fundedhealth care.”
Meanwhile, the deficit hawks continue their damaging and alarmist talk of a federal debt that will soon be above 57 percent of GDP, or 82 percent of GDP by 2019. They overlook the fact that–as Mark Weisbrot, co-director of CEPR, writes–“the United States had a public debt of 109 percent of GDP in 1946, as it began the ‘golden age’ of its historically most rapid economic growth over the ensuing 27 years–growth that resulted in broadly shared prosperity, unlike that of the last three decades.”
Just as we saw during the New Deal, there will be signs of recoveryduring which the deficit hawks will urge for spending cuts. In fact,after New Deal policies cut the unemployment rate from a peak of morethan 25 percent to just over 10 percent in 1936, similar calls forfiscal restraint then led President Roosevelt to try to balance thebudget. The result? The unemployment rate rose again in 1937 and 1938and the country went back into a severe recession.
As economist and Nation contributor Dean Baker said to me, “The problem was not that Keynesianism failed, it was that it wasnot pursued with enough vigor.”
It is indeed a time for vigor. In the absence of consumer spending andbusiness investment, the government must step in and use these deficitsin order to avert a depression. Our greatest deficit, after all, is ourpublic investment deficit.
But another stimulus won’t pass without serious work. The CEPR honorroll is one good effort to get economists involved. And progressiveorganizations are mobilizing the grassroots.
“Grassroots organizing is critical,” Apellbaum said. “The disparitiesin the way Citigroup and GM were treated and in the amounts of moneyspent to bail each of them out makes clear what elite opinion thinks isimportant. Working people need to mobilize to get the help they–andthe real economy–need.”