Readers of the Friday edition of “Audit” may have the feeling that the author has gone crazy. The thing is that I mentioned that Thursday’s data on new job creation by the American private sector is altogether encouraging and if confirmed, may mean a turn in American economic development.
But even though the Thursday data gave a boost to world stock markets, in the end, they were not confirmed on Friday. Friday’s more detailed information on unemployment (excluding seasonal farm work) brought a cold shower for American economists and the entire American public.
Economists had been expecting the U.S. economy to add 100,000 (non-seasonal) vacancies, but it didn’t happen. New jobs grew only by 18,000, and unemployment even grew moderately. Wages decreased, and more than 250,000 people stopped looking for work.
Technical professions and medicine, for instance, added new job openings; construction and industry remain the same; and the financial industry, but mainly the public sector, is laying off workers.
Although American conservatives would like to cut back far more quickly (in power they wouldn’t be able to do it so easily), the American public sector is laying people off: The federal government has eliminated 14,000 jobs. Altogether, the public sector laid off 39,000 people in June. State and local governments laid off 659,000 in the past year.
Reuters commentator Agnes T. Crane claims that at this rate it will take the U.S. 30 years to reach its pre-crisis employment level. State and municipal offices have already been forced to make painful cutbacks — for example, in the area of education — in order to make up for decreasing revenues, which are falling as the result of shutting down stimulus programs. But where can the federal government get money now that it has to lower expenses by $4 trillion in the next decade and Republicans refuse a tax increase? Further layoffs will simply increase unemployment.
But tax increases will certainly not increase employment either, we must add.
Mohamed El-Erian lays out precisely what the big agreement between Republicans and Democrats should be about: for America to become credible once again — both internally and externally.
Finally, take Dean Baker from the server Calculated Risk. In the long run, the U.S. needs to create 90,000 jobs monthly in order to keep pace with population growth.