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Tuesday, November 17, 2009

Dr. Doom Speak, You Listen
Posted by Jill | 5:56 AM
I wonder, when the Republicans and their corporate buddies decided that the middle class was a pesky thing that needed to go away, returning us to the Golden Age of lords and serfs, if they thought about how a few preposterously wealthy people were going to be able to buy enough STUFF to keep an overall economy going. Operation Feudal System has now been almost completely successful, and it will be interesting to see how it plays out now that it looks like unemployment is going to hit near-Great Depression levels, while the Dow marches merrily along.

Nouriel Roubini has been dismissed by just about everyone (including the Obama administration, which places him right up there with Paul Krugman and Joseph Stiglitz in the Pantheon of Guys Who Are Right And Must Be Ignores), but he's been spot-on right all along. So it's worth paying attention to him now:
So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.

There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.

The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost.

This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.

Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.

Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.

The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.

In past, less severe recessions, we started to see a rise in resentment against the poor, who were always referred to as lazy people who don't want to work. Now we see wide swaths of the country in which middle-class and working-class white people aren't working. That doesn't exactly inspire confidence in the "Work hard and you'll get ahead" doctrine that has kept Americans silent during the last 30 years as ever-more wealth has been shoveled upwards into the pockets of those who already have far more than they can ever spend. It isn't Barack Obama who caused this (though his preference for guys like Tim Geithner and Larry Summers over guys like Roubini, Krugman and Stiglitz hasn't helped). But he's going to preside over one hell of a wake-up call by those who used to have jobs where they could work for a living. And as long as he continues to coddle Wall Street at the expense of the people who elected him, he's going to open the door for some right-wing demagogue to wrest Congress -- and his office == from him. And if you think things are bad now, just wait till the extreme right takes over.


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Blogger Suzan said...
Not our economy anyway.

The word has been out for a while now that all the real wealth still here has been moving itself (somewhat quietly) overseas as it picks the last bones of the middle class clean.

And moves on to South/Central America and Asia.

(Africa's almost picked clean already, of course - thus the blood-diamonds movie treatments are just entertainment).

The trick has been that none of the serfs here are even upset about it. Certainly not enough to take to the streets.

But they will. They will.


if they thought about how a few preposterously wealthy people were going to be able to buy enough STUFF to keep an overall economy going.