Yesterday, a poll by CNN/Opinion Research Corp showed that six out of ten Americans believe that the US economy will sink into a depression. The people who conducted the survey made sure to define a “depression” is before getting answers.
The list: 25% unemployment rate; widespread bank failures; and millions of Americans homeless and unable to feed their families. Even with that litany of horrors, people were willing to bet things will get that desperate.
Economists argued that the view of the common man reflected in the poll is flawed, saying the government’s agencies, such as the FDIC, Fed, and Treasury, can keep the world from that kind of harm.
It would be hard to pick a point in the last fifty years when the level of despair has reached such an improbable level. And, there is nothing left to turn that back in the right direction except by having people go to work.
The collapse of Wall St, as it has been known and operated for years, is now nearly complete. The government repossessed the financial services business and probably did so for a number of good reasons.The nation’s attention has turned to interest rates and economic stimulus, but none of that will matter much because, so far, none of it is working well.
That leaves jobs, which are talked about once or twice a month when the Commerce Department puts out statistics. The employment rate has not hogged the front pages the way that the Congressional testimony of Dick Fuld or the $700 billion bailout have. That is wrong-headed. Jobs are all that is left still standing in the rubble of the economy that Americans have known for the last several decades.
By way of intuition, most people would think that a housing crisis would result in a tremendous loss of employment. But, workers who have been thrown out of their homes can still work. As a matter of fact, they are likely to have a greater incentive to do so for the sake of keeping a roof over their heads. The average person may face $4 gasoline, a 21% interest rate on his huge credit card balances, and pay $10 for a loaf of bread, but he can still work all day long, even if he is getting poorer. Being out of work would accelerate the process of impoverishment and there is not much satisfaction in being completely broke.
Given the level of catastrophe that most people believe has hit the American capitalist system, it is a wonder that official unemployment has only gone from 5.1% in March to 6.1% last month. After a brief consideration of the dynamics of the workforce, no one should surprised that people are still working—at least for the time being. They produce so much that they are still of service to many enterprises. At the same time, their real wages have not gone up an iota in five years. They are some of the cheapest labor in the world.
Almost every statistic from the US government and those think tanks with enough money to employ an economist says that the American worker is the most productive in the world. Pound-for-pound and hour-by-hour he can bury his counterparts In China, Russia, India and Easter Island.
With a recession upon us and savaging our home values and bank accounts, jobs are all the US has left. If unemployment moves to 7% or above, there are no more buttresses to hold the walls. The economy is overrun.
The indexes of manufacturing and capital expenditures and recent warnings from large corporations give every indication that there will not be enough work to go around. The available employment statistics are bogus prior to any sensible analysis. About 4% of the American workforce is not listed as “unemployed” because some workers have given up looking. They have lost either will or hope and have dropped off the map of the potentially productive. Add these people in and a fairer picture of the jobs market would show that 10% of those who could work are not working.
If unemployment moves to 10% as it is measured by the Commerce Department, with the shadow world of people out of work added in, the actual number will be closer to 15%. That may not be the 25% that defines a depression, but it will certainly feel like it to people who were not in the workforce in 1935.
The federal government does not do much to directly support jobs. It may buy up mortgages and save big banks. By doing so, the attention has been shifted away from the person who gets up and goes to work every day. He is the last line between a modest recession and a long deep period of economic contraction that almost no one alive has seen
Douglas A. McIntyre