By Paolo von Schirach
June 15, 2013
WASHINGTON – Sometimes the real “news” is not news at all. Surprisingly, once a new conventional wisdom is accepted as “the truth”, the real facts that tell a different story are simply ignored or explained away. Case in point, the high US unemployment rate and the types of jobs actually created by this rather weak American economy.
Good news?
We are now at point in which an unemployment rate still stubbornly above 7%, (right now at 7.6%) is considered good; because, hey, it used to be 10% or 9%. “So, we are making progress“. Indeed we are. But this is the worst recovery in recent history. The US economy used to grow at an average rate of 3%. Now it grows at an average of 2%. The difference is enormous. The negative implications of slower growth in terms of diminished future wealth are obvious and truly dramatic.
All is well
But if you watch TV business channels, all the various commentators stress that we are doing fine. We have emerged from a deep recession. Our rate of growth is not great, they admit, but it is OK. And yet, compared with recent history, this rate of growth is close to calamitous. It means a loss of 30%, year after year. And you think this dramatic economic slow down will have no long term consequences on capital formation, standards of living, purchasing power and ultimately US international competitiveness? Are you kidding me?
What kind of jobs is this economy creating?
But the worst “non news” is in the deliberate lack of analysis of the kind of new jobs created by this anemic economic expansion. Anybody even minimally curious would quickly learn that, while the economy is growing and new employment is created, much of it is under employment consisting of low paying jobs in services, with a high proportion going to health care. Now, new jobs in nursing homes may be good for those who get them, but they are not exactly “force multipliers” and drivers of economic growth.
Furthermore, we know of medium and small enterprises that purposely hire people for only a limited number of hours in order to exclude them from the costly health care benefits envisaged by the Affordable Care Act, (universally known as Obamacare).
The real picture: slow growth and too much under employment
So, there you have it. Sluggish growth renamed adequate. Lousy unemployment numbers now accepted as the new normal. And, worst of all, part time and low paying jobs counted as if they were like the solid manufacturing jobs of 30 or 40 years ago.
Quite clearly it is difficult to predict the cumulative consequences of systemic under employment and low paying jobs in sectors that do not boost US international competitiveness. But intuitively anybody can figure out that all this does not indicate future, self-sustaining and robust growth.
Contrarians are easily dismissed
Occasionally a contrarian expresses this healthy skepticism on some TV talk show. But he is generally treated as some kind of weird Cassandra making dire predictions at a time of plenty.
“How can you say this –asks a skeptic host– when the Dow Jones has reached new heights, and we are having respectable growth?”
“Is everybody else wrong? How can it be?”
“The Fed will keep interest rates low for years and years, so this is the right time to invest in the stock of companies destined to succeed”.
“Not so”, replies the skeptic. “This is a Fed induced stock market bubble; and over time the impact of low paying jobs in weak sectors will be felt throughout the economy. The American economy is far weaker than it appears”.
All true, I am afraid. But it is a lot easier to ignore these unpleasant considerations and focus on the Dow Jones above 15,000.