The Real Causes Of Our "Jobless Recovery"

No.: 
84

There is a lot of untapped potential for addressing the nation’s crumbling infrastructure when 9 million Americans are picking up June unemployment checks. So what’s missing? When the financial crisis hit in 2008, Wall Street’s biggest concern was a survival plan for Wall Street bettors, not Main Street jobs. Inscrutably, when the Obama administration took power it veered toward the financial intelligentsia’s “recovery” plans, not a technologically robust infrastructure overhaul vision. Corporate balance sheets now bulge with record cash — $837 billion for S&P 500 nonfinancial companies. Nevertheless, as observed by Moneycentral’s Jim Jubak, financial trickle down theory has revealed its limits when it comes to jobs (“Biggest Problem Now: Job Creation”).

The real problem, according to Jubak, is that the U.S. has lost the ability to match job growth with population growth. During the Clinton years, the U.S. economy added 23 million net jobs. The rapid job creation reflected the combination of tight fiscal policy with falling interest rates and loose monetary policy. The combination of jobs and stimulus resulted in people binging on borrowing and spending. The mutant behavior was sustainable only as long as inflated real estate remained within the reach of buyers. Once it was apparent how ridiculously priced the real estate market had become in the nation’s coastal and growth areas, Wall Street was no longer able to support the bubble’s expansion with the securitization of mortgage debt.

Seeds Of Job Decline Planted Decades Ago

In retrospect, the artificially contrived growth environment of the 1990s was unsustainable due to a lack of sound dynamics. The nonsensical growth was based on easy money, real estate inflation, home equity extraction, the securitization of unaffordable mortgages, uncontrolled immigration by low-skill workers, and other dubious inputs. Burgeoning job growth in the financial sector served to camouflage the amount of damage wreaked upon the U.S. job market by the Bush and Clinton administrations. Government leaders said it was all hunky-dory as they sent U.S. capital and jobs overseas.

As Jim Jubak observes, the second Bush administration was a disaster for the U.S. in terms of jobs. In 8 years just 3 million net jobs were added at a time when the country needed to create around 13 million jobs to keep up with a population increase of 22 million persons. Thus, America was already short on jobs when the financial crisis hit in 2008. Granted, many businesses had a hard time finding well-educated, professionally competent employees in 2005-2007 due to the hiring demands of the rapidly growing financial and healthcare sectors. Setting aside finance and healthcare, the growth of cheap consumer products and mass distributed entertainment (e.g., as in pay-per-view television) brought little American job growth.

In the case of Hollywood entertainment, corporate revenues marched upward without the addition of many good-paying jobs as would be expected from strong revenue growth in the manufacturing sector. In essence, the expression of altered consumer tastes created a free market dynamic that stripped jobs out of the economy. America was not shopping for lasting quality or craftsmanship but for instant gratification. In short, we purchased the types of things that did not create good jobs at home.

Population Dynamics Don't Help Either

Another dynamic that harms America’s future job landscape is the manner in which the country’s population is expanding. Couples with the most intellectual firepower — hence the aptitudes to help us maintain competitive positions in a technologically complex world — are not having many children. This applies to Asian, Hispanic and African intellectuals as well as Caucasion intellectuals. Conversely, in China the best educated people are having the most children — and obtaining technically advanced educations for them, too. Back in America over two-thirds of our population growth in recent years reflects immigration and births to immigrants — legal and illegal. While many of these good people are willing to work for low wages, they cannot work for under $1 an hour, like underclass Chinese workers do. Thus, the sellout of American immigration policy in search of cheap immigrant labor did not help our country recover lost manufacturing. Republicans and Democrats are equally to blame.

Extrapolating our current population growth rate, the U.S. is theoretically on track to exceed China’s current 1.2 billion persons in LESS TIME from here than we are removed from our own Civil War. How bizarre is that! Not only does America have no chance of providing resources and a reasonable standard of living for an additional 900 million people, the looming prospect of proletarian masses clearly smashes the American dream while portending social unrest.

It takes a decayed public mind not to realize that continued growth results in a national disaster. Why should it be a future generation’s problem to deal with the unsustainable growth issue? Since Wall Streeters want to lead, why don’t they condemn “recovery by growth”? Many of our politicized economists seem to think that if we can just gain enough momentum by being financially foolhardy (i.e., more stimulus), we’ll be able to someday afford the costs of behaving prudently. Unfortunately, this has been our game plan for the last umpteen years.

Heard About The ‘Subprime’ Diploma Crisis?

During the first three decades following WWII, our country developed quality jobs because our educated workers had skills envied by the rest of the world. But no longer! Just as government leaders pressured Fannie Mae and Freddie Mac to open mortgage doors to unqualified persons, the same political dynamic caused higher education institutions to graduate people undeserving of their university degrees. Essentially, college credentials for the bottom third of students graduating from many educational enterprises have been made as worthless as liar-loans. Much of what is generated by public universities nowadays ought to be labeled “subprime.” Students are often in default on basic skills as they mount the stage to receive diplomas. The condition of higher education in many places becomes ever more scandalous as the price tag mounts.

Businesses find they can no longer afford to buy “College Street’s” mistakenly rated products. Just as Moody’s and Standard & Poor’s inflated their ratings for Wall Street’s debt securitizations, the nation’s educational accreditation services are late in recognizing what is wrong with the product now widely generated in educational enterprises. As a result, America can no longer depend upon the aptitudes, skills and services of the upcoming generation to give us an international edge.

Cultural And Moral Factors At The Core

Jim Jubak says the real puzzle of the Bush administration is why all the stimulus did not create more jobs. A good part of the answer is cultural decline. It is now impossible to accomplish what FDR achieved during the Great Depression era because too many people lack the needed aptitudes and skills, work ethics, introspective honesty, and shared vision of America. When it comes to public projects, managers cannot turn things around because so many skewed assumptions of political correctness undermine the ability to lead effectively. Performance evaluations are now geared to counting beans rather than identifying merit that matters.

American corporations are not going to bleed cash to bring jobs home from Asia when they must regularly advance weak performers due to identity group politics. Furthermore, why hire when so many American workers will not work except on their own terms? Why hire when companies that raise payrolls at a cost to profit margins are vigorously punished on Wall Street? Why hire in the face of soaring healthcare costs when no such burden is faced in many places overseas?

Managers in bloated government agencies are often afraid to discipline the listless because lethargy is so widespread that any employee singled out may seem unfairly corrected. What manager needs the grief of challenging a recalcitrant worker who owns a property right in the job? Indeed, attitudes in the federal bureaucracy have bled over into the private sector increasing the risks of bringing on new employees. Meanwhile, in Southeast Asia tens of millions of workers strain to make hay while the sun shines.

Religion’s moral imperatives continue to decline in the workplace. In some places people call themselves ‘religious’ in one breath while waiting to cheat you in the next. Increasingly, one finds managers and departmental directors who are untrustworthy. Even the adequacy of the executive suite is broadly in doubt as malfeasance is repeatedly exposed. In environments where confidence is damaged by high profile failures of scruples and integrity, business expands less robustly and hiring lags.

Don't Forget About The Government's Role

Attitude and competency are just part of the story. Partisan pork barreling and “security hyperthyroidism” has bloated and spoiled healthcare and the military sector. Nearly half of the planet’s military expenditures (45%) come from the U.S. A nation cannot spend that much on methodologies of destruction without losing its moral and technological claim on the future. A better plan would involve redeploying half of our military manpower and expenditures in a war on fossil fuel dependence. Create ways for 75% of American communities to obtain the majority of their fixed infrastructure energy supplies from clean, renewable sources — non-food sources! After all, what is the recent $2 billion Obama solar development initiative compared to a $663 billion defense budget?

One beneficial thing we could do for America’s job market is to shift 40% of our $2.5 trillion of healthcare expenditures elsewhere. We don’t need to cut private sector spending as much as we need to redirect it toward enterprises that help us recover sustainable national prosperity. The more dependent we become upon healthcare jobs, the more difficult it becomes to sustain international competitiveness. Most developed nations spend far less per capita on healthcare than we do, yet demonstrate comparable health outcomes. Simply put, we’re maladroit at healthcare because we substitute dollars for good stewardship. Misaligned incentives for doctors and patients contribute to this result.

A new wave of common sense could help us free up a trillion dollars of low benefit healthcare expenditures to invest more prudently in building the world’s most competitive green-friendly manufacturing infrastructure — a mission-informed system aimed at sustainable production. By normalizing a new era of nationally responsible consumer behavior we could support appropriate industries while creating jobs at home for motivated persons. Granted, people’s attitudes and behavior would have to change on and off the job — especially entitlement attitudes. A national betterment ethos would have to develop where people relinquished individual foolhardiness in exchange for a stake in a better society. While such a turn is unlikely, it is useful to consider what it would take, theoretically, to get the engine of national good back on the tracks. If the national will cannot be directed wisely — if intellectual, political and religious leadership is inadequate — Americans will have to share the painful consequences.