Unemployment back over 9%

Economic slowth continues to smother the American job market (WSJ):

U.S. hiring slowed dramatically in May and the unemployment rate kept rising, adding to concerns the jobs market will take years to heal as the economy remains weak.

Nonfarm payrolls rose by 54,000 last month as the private sector posted the smallest jobs gain in nearly a year, the Labor Department said Friday in its survey of employers. Payrolls data for the previous two months were revised down by a total 39,000 to show increases of 232,000 jobs in April and 194,000 in March.

The jobless rate, which is obtained from a separate household survey, unexpectedly rose to 9.1% in May from 9.0% in April. There are almost 13.9 million Americans who would like to work but can’t get a job.

If you think that’s bad, wait until next month, the traditional month where teenagers no longer at school take their place in the workforce.

What we’re seeing is a combination of factors. They are . . .

The aforementioned slowth: my term for, literally, slow growth. For at least thrity years, economies pulling out of recession have taken time to hit their stride. In the 1980s it was one year; in the 1990s, about three years; in the aughts, at least four years. For this “recovery,” slowth is now deep into its third year and shows no sign of disappearing.

Notice a pattern here?

All three “slowth” periods came after the Great Inflation (1968-81) meaning that price levels were a political issue to a much greater extent that before – or even during – the GI. More importantly, however, all three saw the federal government in major spending booms (defense in the 1980s; health care in the 1990s and aughts; just about everything today. One could argue (and in fact, I would) that in each case, the American people saw plans dramatic increases in spending, expected future tax increases to pay for it, and acted accordingly.

If anything, the exceptions prove the rule: the 199os was the one decade where the massive spending hike did not occur (health care “reform” collapsed; the GOP took over Congress; and Clinton agreed to a slow path for government spending) . . . and the one decade that saw a natural “boom.” Meanwhile, the aughts, plagued by permanent spending hikes and temporary tax cuts (all but telegraphing a tax hike in the future) saw the longest “slowth” period and the weakest overall recovery since the Inflation-plagued 1970s.

In other words, the American people knew what was coming, and acted accordingly.

For the current era, the proscription is therefore clear: make the Bush tax cuts permanent and get serious cutting spending. Only that will show the American people that government spending will fall (and future tax hikes avoidable), thus unlocking both the capital and disposable income currently on the sidelines. The “Ryan” plan moves in that general direction, but doesn’t really get there (the Garrett plan does). Of course, if we see some serious spending cuts out of the debt-ceiling negotiations, that would help, too.

Cross-posted to the right-wing liberal

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About the author

D.J. McGuire

Former candidate for Board of Supervisors in Spotsylvania, current blogger, economics teacher, and long-rumored windbag. There are two causes closest to the heart: steering the country away from the social democratic nonsense that is sinking Europe, and convincing the rest of the "rightosphere" that the NBA really is a joy to watch.