Can the economy recover if workers don’t? Federal Reserve Chair Ben Bernanke yesterday suggested as much, but investors were clearly skittish. Bernanke announced that while the Fed would continue its extraordinary measures to prop up the economy, the end might be in sight. If the official unemployment rate continues to fall, the Fed might ease up on the gas later this year and begin reducing its purchases of bonds and mortgage securities. The bond and stock market began plummeting as he spoke.
The essence of Bernanke’s argument is that the economy is slowly recovering. Stocks are up. Housing prices are coming back. The economy has been generating jobs. It seems to be overcoming the drag of sequester spending cuts. Although inflation is still virtually nonexistent, the bond vigilantes have been increasing pressure on the Fed to move away from its extraordinary intervention.
Only there’s one small problem. Most Americans aren’t invited to the celebration. The economy may be recovering, but workers are still ailing.
There are still more than 20 million Americans in need of full-time work. The official unemployment rate has drifted down – although still an abysmal 7.6 percent – mostly because people are dropping out of the market. The employment rate – the percentage of people of working age who are working – is still at recession levels. At current rates of growth, the U.S. won’t return to the pre-recession level of 5 percent unemployment until 2022. (And even at that level, Americans were not seeing wage increases. )
Corporate profits are up, but wages aren’t. Wages are now at the lowest percent of the economy on record. The median wage hasn’t budged this century – and the wages of non-college educated workers have fallen.
And federal policy remains perverse. Austerity – a focus on spending cuts to reduce deficits – has driven Europe back into recession. And now the U.S. is headed that way. Even the conservative International Monetary Fund calls for repealing the sequester, warning that the U.S. is threatening global growth by “excessively rapid and ill-designed” deficit reduction. The Fund predicts less than 2 percent growth this year for the U.S., down from last year.
Bernanke sensibly announced no change in the Fed’s extraordinary measures to pump up the economy. But the change in tone at the Fed contributes to the deepening misperception that the economic crisis is behind us.
For most Americans, the crisis continues. Jobs are still scarce. Good jobs are still being replaced with low-wage jobs. Families are still falling behind. The current course offers no “recovery” for working people. The current path – even if official unemployment slowly falls over the decade – offers no way out.
We still need a dramatic change in course to make this economy work for working people. Major investments are needed to rebuild the country and educate and train the next generation, while putting people to work. We need a new global strategy to revive manufacturing and balance our expanding trade. We need to empower workers to capture a fair share of profits and productivity that they are generating, lift the minimum wage, curb the perverse executive compensation policies that give CEOs incentives to plunder their own companies. We’ll need progressive tax reform that shuts down tax havens abroad, and requires the wealthy to pay their fair share.
The stock market may rise. Corporations can profit by shipping jobs abroad and ducking taxes at home. Big money speculators may drive up housing prices. But don’t be misled. America won’t recover until people go back to work and families share in the benefits of growth.