Further Thoughts on Economic Up Is Down
Even the mainstream media, this time the Associated Press, is beginning to find the familiar economic narrative peculiar:
“It’s very unusual,” said Mark Zandi, chief economist at Moody’s Economy.com. “At this point in the business cycle, we should be seeing some sort of labor force growth. Layoffs have abated, but there really has been no pickup in hiring.”
Job creation was stronger early in previous recoveries. And jobless people responded by streaming back into the labor force. Some workers are concluding it’s more practical to return to school, start a business or care at home for their kids until the job market improves. In some cases, it even makes financial sense to stop looking for work.
As I’ve been saying for some months, the wealth to fund a recovery must come from somewhere, whether an innovative technology creates a new market, geopolitical changes open up existing markets, changes in taxation and regulation free up wealth or productivity that had previously lain fallow, or money is borrowed from the future. It would be fair to summarize, I think, that the housing boom essentially borrowed money from the future, and the bust erupted when it turned out that the future money didn’t actually exist.
What economic growth is currently occurring may be based entirely on the the resources that the federal government is pumping from the future into the economy, propping up public sector workers and favored industries, even favored businesses. In this scenario, jobs might not be increasing because the market isn’t really expanding. There’s no need to hire people when the uptick in profits derives from a government handout; there’s really not much work to be done in claiming it.
Meanwhile, people are rearranging their lifestyles, effectively taking themselves — and the wealth and productivity that they represent — out of the economy, and businesses are responding to necessity by finding ways to increase productivity without new workers. That means jobs and workers that aren’t coming back… at least until people begin to believe in “must have” goods and services again.
The contraction that the government borrowing seeks to disguise will continue, and eventually people will realize that the future wealth is not what everybody has been pretending it would be.