Mar 10, 2009
How do 2,789,000 job losses over the past seven months morph into 3,460,000? Well, we couldn’t say, exactly, but they did. Every month since August 2008, the Labor Department has revised its initial announcement of job losses, and the revisions have always been higher, on average by 112,000.1 You would think that the obviously imperfect art of calculating job losses, if conducted in anything like an atmosphere of political neutrality, would occasionally be too high initially, and subsequently be revised downward. Such is not the case recently, however, and on March 6, 2009, we found ourselves with 671,000 more of us out of work than was initially reported.
However you explain the rocky path to calculating unemployment, we are losing a half a million jobs a month on average, and more than 650,000 a month over the last quarter. “These jobs aren’t coming back,” opines John Silvia, chief economist at Wachovia.2 “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations.”
We are in a perfect storm of collapse. Businesses have no access to the lifeblood of credit in the face of the banking industry’s self-destruction and the ineffectiveness of the trillions in federal handouts and guarantees. Millions of unemployed cinch their belts another notch, and those who are still pulling a paycheck save more of it in order to bolster their decimated retirement accounts. Spending declines precipitously (17 million cars sold in 2007 and are now selling at an annual pace of 9 million).2 As spending declines, more businesses lay off more workers, spending declines further, and where does it end? If allowed to continue, nowhere pretty.
Let’s do some math. Assume there are five million people seeking work. If the government provided a job for all of them at the average weekly wage of $615.00,3 it would cost $3.075 billion a week, or $159.9 billion for one year (with much of it coming back as income tax and FICA). That is only 20 percent of the $785 billion stimulus package (universally acknowledged to be inadequate), and way less than the government has lavished on the banks to no apparent purpose. And jobs—not hedge funds, collateralized debt obligations, investment banker bonuses, unemployment compensation extensions, tax credits for home improvements, or subsidized COBRA premiums—jobs are the bedrock of any economy. Getting money into people’s pockets next week: This is where the administration should be focused.
Or this vicious circle we find ourselves in will widen, accelerate, and take us all down.
1 Will Job Numbers Keep Being Revised Down?, by Floyd Norris, from the New York Times, Mar 6, 2009, accessed Mar 7, 2009.
2 Job Losses Hint at Vast Remaking of Economy, by Peter S. Goodman and Jack Healy, from the New York Times, Mar 6, 2009, accessed Mar 7, 2009
3 The Labor Picture in February, from the New York Times, Mar 6, 2009, accessed Mar 7, 2009
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