President Obama has announced a White House Jobs Summit for next
month. At least that's the beginning of recognition that the
unemployment rate is unacceptable. The measured rate is now 10.2
percent, but if you count people who have given up or who are
involuntarily working part time, the real rate is over 17 percent.
Stocks are up. Ben Bernanke says that the recession is over. And I sense a growing willingness among movers and shakers to declare “Mission Accomplished” when it comes to fighting the slump. It’s time, I keep hearing, to shift our focus from economic stimulus to the budget deficit.
No, it isn’t. And the complacency now setting in over the state of the economy is both foolish and dangerous.
Word of the money spread quickly.
New York state had put hundreds of dollars in federal stimulus money
into food stamp accounts, and if it wasn't withdrawn by 4 p.m., 9 p.m.,
midnight—depending on the version of the rumor—it would disappear. So
on a sultry August day, lines stretched at ATMs all over the state, a
literal run on the bank.
Seven days ago, the Cash for Clunkers program went into place. At midnight, the program will run out of money, having already supported the trade-in of 250,000 old cars.
As soon as the Obama administration-in-waiting announced its stimulus plan — this was before Inauguration Day — some of us worried that the plan would prove inadequate. And we also worried that it might be hard, as a political matter, to come back for another round.
We bailed out the banks to the tune of 2 trillion dollars in the past year, put through an enormous stimulus bill, bailed out the European banks, put through yet another war supplemental, and never asked how we were going to pay for it. We just wrote a bunch of big checks.
But now that it has come to taking care of the health of Americans, well, we have to tighten the old belt and it's suddenly "pay-as-you-go."
The June US employment report
should convince even the determinedly ignorant that the time has come
for another round of stimulus for the American economy. The economy is
continuing to shed jobs and work hours at a very rapid pace. The
unemployment rate is virtually certain to cross 10% by the end of the
summer and will likely hit 11% before we are very far into 2010.
Several events of the past week should be a wake-up call to the
Obama administration. Bottom line: the medicine isn't working. Stronger
stuff is needed. Consider:
The June Unemployment Numbers.
The green-shoots
school was expecting that the rising rate of unemployment would
continue to slow, as it did in May. But instead the number spiked back
up. A total of 467,000 jobs were lost. The unemployment rate rose to
9.5 percent, and OECD economists project that U.S. unemployment will
still be in double digits as late as 2011.
O.K., Thursday's jobs report settles it. We're going to need a bigger stimulus. But does the president know that?
Let's do the math.
Since the recession began, the U.S. economy has lost 6 ½ million jobs - and as that grim employment report confirmed, it's continuing to lose jobs at a rapid pace. Once you take into account the 100,000-plus new jobs that we need each month just to keep up with a growing population, we're about 8 ½ million jobs in the hole.
This is not only the worst global economic downturn of the post-World War II era; it is the first serious global downturn of the modern era of globalization. America's financial markets failed to do what they should have done--manage risk and allocate capital well--and these failures have had a major impact all over the world. Globalization, too, did not work the way it was supposed to. It helped spread the consequences of the failures of US financial markets around the world.
