The Wages of a Phony Recovery

It is imperative that we focus on innovative and creative economic policies.

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The Great Recession, as it is now commonly called, is the longest and worst recession since the end of WWII. It is also marked by the weakest recovery from any recession that we have had in that same period.  In June, the government's Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000 - but there are "jobs" and then there are jobs. No fewer than 557,000 of these jobs were only part-time. The Survey also reported that in the month of June, full-time jobs declined by 240,000, while part-time jobs soared by 360,000 and have now reached an all-time high of 28,059,000, three million more than when the recession began at the end of 2007. By contrast, the number of people working full-time actually fell. That's just for starters. The Survey includes involuntary part-time workers, as well as those who want to work but have stopped looking, and that puts the real unemployment rate for June at 14.3 percent, up surprisingly from 13.8 percent in May. 

At this stage of an expansion you would expect the number of part-time jobs to be declining, as companies would be doing more full-time hiring. Not this time. So in this “Long Misery” of a recession, we have the extraordinary situation of millions of enforced part-timers by necessity taking these jobs because they are the only employment opportunities available to them, as businesses increase their reliance on independent contractors and part-time, temporary, and seasonal employees. Even government payrolls have been shrinking, not only in state and local lay-offs but more recently at the federal level. In June of last year, 58,000 federals workers were part-timers. This year it's 148,000, and we still don't know how the sequester will play out, for many agencies have resorted to furloughs rather than layoffs. 

This is also reflected in the latest unemployment report where the biggest gains came from leisure and hospitality industries, extending from hotels to fast-food restaurants. Of the 195,000 new payroll jobs, 75,000 were in restaurants and bars, where the average weekly paycheck is about $351, less than half the figure for all other private industries. Not to mention that they have fewer shift hours especially in the restaurant world, which has averaged 26.1 hours per week versus 34.5 hours for all private employers.

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What's going on? The fundamentals surely reflect the feebleness of the macro-economic recovery that began roughly four years ago, reflected in an average GDP growth rate annualized over the last 15 quarters at a miserable two percent. That's the weakest GDP growth since WWII. Over a similar period in previous recessions it averaged 4.1 percent. During the fourth quarter of 2012 and the first quarter of 2013, the GDP growth rate dropped below two percent, so we are not going to see an early ending to our misery. Bear in mind that this anemic growth is all we have to show for the greatest fiscal and monetary stimuli in 75 years, with fiscal deficits of over 10 percent of GDP for four consecutive years.

The truth is we do not have any clear idea how to improve our economies without the lubricant of serious growth in GDP, and the rate of GDP growth has been decelerating at the very moment we need it to be accelerating. According to the Brookings Institution, at the growth rate of roughly 195,000 jobs a month, it will take nine more years to return to the pre-recession level of employment, for we are 10 million jobs short of returning to normal levels of unemployment and labor force participation.

The most troublesome development is the decline of manufacturing. In 1978, we had 17.8 million manufacturing jobs. They represented 25 percent of all 71 million U.S. jobs. In 2012, we have a mere 11.9 million manufacturing jobs representing only nine percent of the 133.7 million total jobs, a decline that reflects automation and imports especially of labor-intensive products. Today's 97,000 steel workers produced nearly 10 percent more steel than 399,000 steelworkers did in 1980. In the clothing industry, output has dropped more than 80 percent since 1980 with the number of jobs falling from 1.3 million to 150,000.