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Friday, August 26, 2005

Krugman punctures the economic helium balloon
Posted by Jill | 7:37 AM

Krugman has been debunking the Administration's "Don't worry, be happy" economic talk for some time now. Some people seem to think that because their houses have increased in paper value quickly, everything's fine. By that logic, I should be thrilled. My house is now worth more than double what I paid for it. On the other many homeowners who have had "For Sale" signs in front of their houses for three months thought the same thing.

The fact of the matter is that the housing market has started to cool, because of rising interest rates and growing job insecurity. I feel vulnerable in my job every day I go to work. My job depends on research grants, and when the grants dry up, so does the job. I'm a 50-year-old Web developer, and I'm under no illusions about my employability in my field, OR my ability to "break in" in another industry. I'm lucky in that I like my job and have no intention or desire to leave, but if the choice were to be taken away from me, my next move would have to be some kind of self-employment -- or working for 1/3 the salary -- and that's if I'm lucky.

Krugman addresses the truth behind the job numbers:

American families don't care about G.D.P. They care about whether jobs are available, how much those jobs pay and how that pay compares with the cost of living. And recent G.D.P. growth has failed to produce exceptional gains in employment, while wages for most workers haven't kept up with inflation.

About employment: it's true that the economy finally started adding jobs two years ago. But although many people say "four million jobs in the last two years" reverently, as if it were an amazing achievement, it's actually a rise of about 3 percent, not much faster than the growth of the working-age population over the same period. And recent job growth would have been considered subpar in the past: employment grew more slowly during the best two years of the Bush administration than in any two years during the Clinton administration.

It's also true that the unemployment rate looks fairly low by historical standards. But other measures of the job situation, like the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply.

Employers certainly aren't having trouble finding workers. When Wal-Mart announced that it was hiring at a new store in Northern California, where the unemployment rate is close to the national average, about 11,000 people showed up to apply for 400 jobs.

Because employers don't have to raise wages to get workers, wages are lagging behind the cost of living. According to Labor Department statistics, the purchasing power of an average nonsupervisory worker's wage has fallen about 1.5 percent since the summer of 2003. And this may understate the pressure on many families: the cost of living has risen sharply for those whose work or family situation requires buying a lot of gasoline.


Think about that: Northern California used to be the capital of technological innovation. Now, 11,000 people show up for 400 jobs being abused by Wal-Mart. What does THAT tell you about the job market?

There isn't a professional field now that can't be outsourced. Accounting, financial services, IT, scientific research and analysis -- all have been affected by outsourcing. When jobs that pay $60,000 or more and offer medical benefits and retirement plans are being replaced by jobs that pay $10/hour, with a requirement of working for a year before you get any benefits at all, and a policy that prevents workers from getting enough hours to qualify, the number of jobs created becomes meaningless.

The right wing has been trying to dismantle the middle class for a generation now, ever since the Reagan administration. Now it looks like they just might succeed.
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