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Saturday, February 5, 2011

 

The Jobs Report and America's Two Economies

The Jobs Report, and America's Two Economies

Robert Reich

Huffington Post

02.04.2011

At a time when corporate profits are through the roof, the Dow is flirting with 12,000, Wall Street paychecks are fat again, and big corporations are sitting on more than $1 trillion in cash, you'd expect jobs be coming back. But you'd be wrong.

The U.S. economy added just 36,000 jobs in January, according to today's report from the Bureau of Labor Statistics. Remember, 125,000 are needed just to keep up with the increase in the population of Americans wanting and needing work. And 300,000 a month are needed -- continuously, for five years -- if we're to get back to anything like the employment we had before the Great Recession.

In other words, today's employment report should be sending alarm bells all over official Washington. Granted, unusually bad weather may have accounted for some of the reluctance of employers to hire in January. But even considering the weather, the economy is still terribly sick. (Technical note: The official rate of unemployment fell to 9 percent from 9.4 percent, but that's because more workers have left the labor market, too discouraged to continue looking for work. The official rate reflects how many people are actively looking for work.)

We have two economies. The first is in recovery. The second remains in a continuous depression.

The first is a professional, college-educated, high-wage economy centered in New York and Washington, that's living well off of global corporate profits. Corporations continue to make money by selling abroad from their foreign operations while cutting costs (especially labor) here at home. Wall Street is making money by taking the Fed's free money and speculating with it. The richest 10 percent of Americans, holding 90 percent of all financial assets, are riding the wave. And their upscale spending has given high-end retailers and producers a bounce.

The second is most of the rest of America, and it's still struggling with a mountain of debt, declining home prices, and job losses. In coming months most Americans will also be contending with sharply rising prices of food and fuel.

Our representatives in Washington see and hear mostly the first economy. The business press reports mainly on the first economy. Corporate and Wall Street economists are concerned largely with the first economy.

But the second economy will determine our politics in 2012 and beyond.

And not even the first can be sustained permanently on its own. Corporate profits cannot continue to rise on the basis of foreign sales (which are slowing as Europe adopts austerity and China raises interest rates), the purchases of the richest 10 percent of Americans (which are dependent on a rising stock market), and cost-cutting measures at home (which are necessarily limited). Without a strong and broadly-based middle-class recovery, America's big money economy will fall in on itself. A major stock market "correction" is a certainty.


Comments:
Wow, I'm shocked that I agree with something written by Robert Reich.
"The second remains in a continuous depression"
Yeah, I have been following wages for quite some time being part of the second economy. (Hourly wage earner)
Hourly wages have not kept pace with the cost of living thats for sure. I had more purchasing power back in the 60s when I was making 2 to 3 dollars per hour as an unskilled worker.
I seen a job listing yesterday someone was looking for a home repairman. The wage was $10.00 per hour on a contractual basis. What that means is you are self employed.
The employer is getting out of his employee overhead cost which runs about 30%.
No doubt the employee will need to supply their own tools and transportation for tools.
All for $10.00 hr ( f*** that )
And you have to keep in mind that the numbers they give are false. The real numbers are probably much worse.
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