06 June 2011

End of the "recovery" now in sight

The Financial Times reports that yesterday "[t]he White House denied the US was facing a 'jobless recovery'". The number of people who want a job is actually significantly higher than it was when Obama was inaugurated, so the White House couldn't be taking issue with the "jobless" part. But it seems fully justified to deny that this is a recovery.

As I argued two months ago, the failure to address any of the fundamental dysfunctions that caused the crisis mean the only uncertainty we face is whether our economic decline will be gradual or abrupt. The superficial signs of a return to economic health, which for the last half year have been used to justify loose talk about "recovery", are, one by one, falling apart. In May US job growth slumped sharply and the unemployment rate rose to 9.1 percent. The head of the Bureau of Labor Statistics says that this reflects a “general weakening in job growth” rather than the temporary disruptions that have been such popular scapegoats whenever bad numbers come out. (Funny how "temporary disruptions" never seem to get in the way of a period of strong growth.) Manufacturing is deteriorating in the US, UK, and EU alike. Real estate prices have fallen to a post-crash low. Even the one bright spot over the last two years - speculative asset bubbles - might be heading for a crash. The stock market reacted badly to the recent signs of economic weakness, and bank stocks have taken a big hit recently as the government subsidies and accounting tricks that had returned them to profitability have started to run out.

To see the indisputable failure of the "recovery", one needs only look at this chart:
That's the average duration of unemployment in the US. Now at 40 weeks, it's not only at the highest point since the BLS started keeping track, it's actually almost twice as long as at any previous point in the last 60 years.

The big question now is whether a new round of crisis will blow up soon, or whether the pressures will build up over a number of years and give us something much more devastating. On the one hand, as long as the terminal crisis of neoliberalism is held off, there is still hope of making the transition to a new basis for the global economy thru a planned, gradual process that would be far less destructive than a near-term financial collapse, for instance, would be. On the other hand, if we avoid a crash in the short term but can't assemble the political will to make a conscious transition . . . well, remember World War II?

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