Fresh from a convention which dramatically promoted Bold New Ideas from the Nineteenth Century, the ever-innovative GOP has a NEW question for the 2012 campaign — Are you better off than you were four years ago? Somehow, I think perhaps I’ve heard that before somewhere… oh, I remember, 1980?
And the answer is a resounding YES. If we are speaking in general economic terms, we are much better off, and trending in the right direction. Taking one of the most general measures, the Gross Domestic Product, things are looking much better than they were in late 2008 – early 2009.
Now, let’s add some highlights to the same graph:
We get a bonus in this category, not only do the figures indicate we are better off in terms of the improvement in our Gross Domestic Product, but the ARRA appears to have mitigated the worst impact of public sector layoffs, strain on the automatic stabilizers, and problems in the construction sector.
What about employment? We’re better off in that economic category as well:
Taking a purely Cartesian view of the graph above shows the “numbers” moving from the 3rd Quadrant wherein all things are negative to the 1st Quadrant in which all things are positive. However, it’s not necessary to have been thrilled to sit in Algebra II in order to observe that in terms of employment the situation is much better than it was in late 2008.
So, why doesn’t it FEEL better? The CBPP offers this explanation –
“Although employers began to add jobs in 2010, the economy has recovered only about 4 million of the 8.7 million jobs lost between the start of the recession in December 2007 and early 2010. As a result nonfarm payroll employment was 3.4 percent (4.7 million jobs) lower in July 2012 than it was at the start of the recession.” (emphasis added)
A rough analogy might be that we’re economic “sophomores,” one of the traditionally more difficult years in high school — and the year in which the oldsters now were then parked in that Algebra II class — we knew we weren’t lowly freshman anymore, but the “end” looked to be off in some distant horizon unreachable in human terms. We obviously have some work to do to get back to pre-recession employment levels.
Another reason the economic situation may not “feel” as good as the days before the Wall Street Wizards drove the American economy into a very deep ditch is that the jobs lost tended to be middle income level, while the jobs gained tend toward the lower end of the pay scale. There’s a chart for that, too, from the National Employment Law Project:
Readers preferring the numbers will note the NELP study showed: “Lower-wage occupations constituted 21 percent of recession losses, but 58 percent of recovery growth. Mid-wage occupations constituted 60 percent of recession losses, but only 22 percent of recovery growth. Higher-wage occupations constituted 19 percent of recession job losses, and 20 percent of recovery growth.” (emphasis added) See also: NYT.
What American workers are facing is called “job polarization,” as Catherine Rampell explains in her NYT article:
“Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.
Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.”
Those mid-wage jobs lost tended to be in manufacturing in which automation and off-shoring account for considerable, and permanent, job declines and public sector employment for teachers, law enforcement personnel, firefighters, and other middle class wage level public employees. [NYT ] Down-sizing government means hiring freezes, or layoffs, and the loss of those wages recycling back into the economy. To borrow a GOP analogy — it’s not hard to reduce the size of government until it could be drowned in a bath tub — BUT we’re draining those wages out of the economy along with the reductions.
Yet another reason for the bind in middle income jobs is that the construction industry still hasn’t recovered from the Housing Bubble puncture. Construction sector employment peaked in January 2006 when banks were still happily handing out mortgages of questionable terms and provenance in order to sate their appetite for more fodder to create highly profitable asset based securities and their derivatives. In numerical terms, the Bubble Collapse and subsequent recession eliminated approximately 2.21 million construction sector jobs. [CalcRisk]
The Prescription: If we accept three fact-based propositions in regard to the employment bind the policies necessary to address the real issues becomes more clear. (1) The reality is that the economic pit into which we tumbled was deeper than advertized. (2) Most of the jobs lost tended to be middle income employment. (3) Those middle income jobs tended to be in the public sector and in the construction industry.
In order to address these three realities any “jobs” plan presented by any politician should (1) seek to halt the decline in public sector employment of teachers, police officers, firefighters, and public service personnel who live and work in communities which need their economic contributions to sustain their economies. Contrary to the half-baked but often served conservative image of The Greedy Public Employee munching vigorously at the trough — these are people who pay taxes, make mortgage payments, purchase automobiles, shop at the local grocery, buy furniture, and otherwise contribute to local economies.
A real “jobs” plan should (2) immediately and directly address the situation in the construction sector. There is a real opportunity here to reprise our Greatest Generation and repair, replace, or maintain the physical legacy of their efforts especially in terms of our infrastructure. We have construction companies seeking to bid for infrastructure related contracts, workers ready and willing to work to complete those contracts, and an almost unconscionably long list of roads, bridges, dams, water treatment facilities, airport facilities, and sewer treatment plants that demand renovation.
A real “jobs” plan should (3) acknowledge that some of the manufacturing jobs of old are not coming back, and that in order to promote industrial growth we need to look to new technologies and offer greater support for innovation. We dismiss new alternative energy technologies at our peril, because while some Republicans are dismissing solar and wind tech as “passing fads” the Germans and the Chinese are investing in them such that they will be permanent and profitable segments of their economies.
The answer to the question is YES, we are better off than we were four years ago, and YES we could be doing better. The answer is definitely NOT to “elect a Republican, give the top 0.1% another big tax cut, and hope the Chinese and the Germans see the ‘error’ of their ways.” Such a response is the economic policy equivalent of telling the patient to take two aspirin, and to ignore what’s really causing the pain.