The June Bureau of Labor Services jobs report – a higher than expected increase of 288,000 jobs with the unemployment rate declining to 6.1% – provides a splash of good news, following the grim reality of an economy that actually contracted in the first quarter of the year. Jobs grew across the economy – particularly in professional services, retail trade and food services. With job growth now averaging 272,000 over the past three months, this report will spark euphoric predictions from pundits and politicians about a robust recovery gaining momentum.
We should hope this is so, but the fireworks are occasioned by the national birthday, not by the economy’s condition. We still have a very long way to go to put people back to work. Over 19 million remain in need of full-time employment, not counting those who have given up completely. Conditions remain brutal for the young, African Americans, Latinos, and high school graduates. The employment to population ratio, at a very low 59 percent, reports no change since last year at this time. The labor force participation rate is lower than it was a year ago. For 16-19 year olds, barely one-fourth (26.8) is employed, down from a year ago. Their unemployment rate remains at a staggering 21 percent.
Nor is it clear where the sustained jobs growth will come from. The federal government won’t help. Republican obstruction blocks much-needed initiatives to rebuild our infrastructure, however modest. Nor can vital investments in education, research and development, or new energy gain traction. The Federal Reserve will continue to reduce its quantitative easing. Jobs in trade were up in June, but export markets will remain limited, with Europe teetering on the verge of recession caused by its austerity. China’s economic growth has been ginned up a bit, but it will continue to struggle with the transition to a more sustainable path. The BRICs are no longer the darlings of the investment community.
That leaves consumers – and the assumption that despite declining household incomes, they will fuel continued growth by adding to their debts. In the case of purchases that can’t be put off indefinitely – replacing an aging car, paying for health care, replacing a leaking roof – this might be true. But it is hard to imagine Americans in an economy that is generating lousy jobs and stagnant incomes deciding to run up their personal debts. There will be a “wealth effect” from rising stock market prices, but this applies to the affluent few that hold the vast bulk of stocks and bonds. They may add to their luxuries, but that hardly seems sufficient to drive a robust recovery to full employment.
The Federal Reserve faces increasing pressure to address the fears of future, long anticipated, yet unseen inflation. Wall Street’s inflation hawks are surely people of faith – which the Bible defines as “the substance of things hoped for, the evidence of things not seen.” The Federal Reserve appears increasingly concerned that its low-interest rates and quantitative easing are driving increases in asset speculation, as investors reach for higher rates of return by taking on higher levels of risk.
One common-sense solution to this is now under consideration in Europe, but not here. The Congress should create a National Infrastructure Bank to rebuild our wretched and dangerous infrastructure. It could be financed by issuing bonds that the Fed could purchase, rather than purchasing mortgage-backed securities and treasuries. That would spark not speculative excesses, but real projects building needed things and employing real people to it. This is such a sensible idea that naturally Republicans block any consideration of it. They seem remorselessly intent on sabotaging anything that might help get the economy going.
President Obama has proposed measures that would help. Funding for infrastructure, refunding the Highway Trust Fund, extending emergency assistance for the long-term unemployed, still at historically high levels, raising the minimum wage. All would provide some boost to the recovery, and help push in the right direction. At this point, House Speaker John Boehner will not allow any of these even to get a vote in the House of Representatives.
So enjoy the good news, celebrate the national holiday. But remember exactly how our poisoned politics are sabotaging the economic growth and stalling the job creation that we so desperately seek.