The jobs report last Friday was confusing, to say the least. Yes, the core unemployment rate fell to 7.7 percent, but a major reason for that was a drop in the size of the workforce—now a mere 63.6 percent of the population, far below what it has been over the past decade. While 146,000 jobs were created, the employment market remains anemic, demand is still low, and median income is still trending flat to down.
All of which raises the question that some continue, properly, to ask: Why the hysteria over the deficit? Shouldn’t we be seeking more stimulus—and a higher deficit? Shouldn’t we be sticking to the macro-policies that brought us out of the trough of 2008-09? Of course we should, especially since the twin fears of stimulus spending—rising interest rates and inflation—are nowhere on the horizon. The White House included a modest $50-billion stimulus in the package it delivered to Speaker Boehner last week. That element of the plan was met with derisive laughter from Republicans. It’s a pity the White House didn’t make a more aggressive argument for the importance of it.
The world has conducted a massive macro-economic experiment since the cataclysm of 2008. In Europe, the fans of austerity have had their chance, and the results have been a disaster. Take a quick look at John Cassidy’s report on British economics in The New Yorker: “It’s Official: Austerity Economics Doesn’t Work.”
While the fiscal-cliff showdown looms, let’s not forget the larger crises of the economy: inadequate demand, stagnant wages, and continuing distribution of incremental income primarily to the top 1-2 percent of income earners. One final data point: In a superb Atlantic article about the potential rejuvenation of American manufacturing, Charles Fishman makes the point that new manufacturing jobs are paying about $13.50 an hour. That is better than no jobs at all, but it is not the path to a middle-class resurgence.