This is the worst Labor Day for American labor in decades, maybe since the Great Depression. Unemployment is at 9.5 percent (as of July), and if we add in the people involuntarily working part time or who have given up looking for work, we get 16.5 percent of the labor force. This means that unemployment plus underemployment has risen by about 14.6 million people since the recession began.
How bad does it have to get before the Congress (and the president) decide that we need another stimulus to get this economy moving? The collapse of home sales in July to the slowest pace on record was a reminder that the market for housing is likely to be depressed for years to come. Home prices have another 15 percent to fall to get back to pre-bubble trend levels. Add that gloom to the labor market and no wonder consumer spending has been weak in this recovery.
You know things are bad when the Chairman of the Federal Reserve – trying to calm the markets, as he attempted last week – makes a speech to his fellow central bankers assuring the world that the Fed has more tools in its toolbox of monetary policies if things get more desperate.
But compared with the elected branches of our government, the Fed has done a lot to counteract this recession. It can and should do more – such as raising its targeted rate of inflation – but right now we need Congress and the president to act.
Fears of a double-dip recession, which is a real possibility, are only part of the story. If the economy limps along at the growth of the last quarter – 1.6 percent – or less, and therefore job creation does not keep up with the growth of the labor force, it will still feel like a recession to most Americans. Even people who are employed will be reluctant to spend because of job insecurity. And businesses will hold back on investment; business investment (not including inventories) is still down 15 percent from its pre-recession peak. The technical definition of recession will not matter, except to the National Bureau of Economic Research. Employment is what matters.
Republicans have successfully promoted the idea that we already tried a stimulus and it didn’t help. There are few, if any, economists who would agree. The non-partisan Congressional Budget Office estimates that between 1.4 and 3.3 million more people were employed by mid-2010, because of the stimulus.
The problem is that there is no stimulus any more, as state and local spending cuts outweigh what little impact remains of federal stimulus on growth. The results of these local budget cuts can be tragic, as on July 20 in San Diego, when a two-year-old child died after a response from emergency medical services was delayed because of fire department cutbacks.
What is the argument against another stimulus? Simply that it will add to our national debt. But what is another few percentage points of debt compared with leaving millions of Americans unemployed, indefinitely, and the risk of a downward spiral that could sink the economy even further? It is better to err on the side of caution – and yes, the side of caution is avoiding the more serious risks.
A national grass-roots non-profit group called Jobs with Justice is organizing a nationwide effort on Sept. 15 to pressure Congress to act. It makes sense to me. Maybe voters should make it a “litmus test” for every Congressional candidate in November: no new stimulus, no vote. If they don’t care enough about our jobs to make a simple commitment like this, they don’t deserve to have a job either.
MARK WEISBROT is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.