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Robert ReichBack to OpinionRobert Reich

The job stall

The White House must be telling itself there are still five months between now and Election Day, so the jobs picture could brighten. After all, we went through a similar mid-year slump in 2011 but came out fine.

But however you look at Friday’s jobs report, it’s a stunning reminder of how anemic the recovery has been – and how perilously close the nation is to falling into another recession.

Not only has the unemployment rate risen for the first time in almost a year, to 8.2 percent, but, more ominously, May’s payroll survey showed that employers created only 69,000 net new jobs. The Labor Department’s Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months.

Put this into perspective. Between December and February, the economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide.  At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.

Face it: The jobs recovery has stalled.

What’s going on? Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they’re slowing as well. All this takes a toll on U.S. exports.

But a bigger part of the problem is right here in the United States, and it’s clearly on the demand side of the equation. Big companies are still sitting on a huge pile of cash. They won’t invest it in new jobs because American consumers aren’t buying enough to justify the risk and expense of doing so.

Yet American consumers don’t have the cash or the willingness to spend more. Not only are they worried about keeping their jobs, but their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents – an increase of 1.7 percent from this time last year – but that’s less than the rate of inflation. And the value of their home – their biggest asset by far – is still declining.  The average workweek slipped to 34.4 hours in May.

Corporate profits are healthy largely because companies have found ways to keep payrolls down – substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that’s exactly the problem. In paring their payrolls, they’re paring their customers.

And we no longer have any means of making up for the shortfall in consumer demand. Federal stimulus spending is over. In fact, state and local governments continue to lay off large numbers. The government cut 13,000 jobs in May. Instead of a boost, government cuts have become a considerable drag on the rest of the economy.

Republicans will  have a field day with today’s jobs report, taking it as a sign that Obama’s economic policies have failed and we need instead their brand of fiscal austerity combined with more tax cuts for the wealthy.

But that’s precisely the reverse of what’s needed.

Published by arrangement with

Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.


  • Vince

    The mastadon in the room seems to be the true formula for the economy’s steady decline. You talk about “jobs” numbers… “unemployment” numbers but no discussion of the real problem… and, that is… that the jobs people are getting are paying only 20 to 60 percent of what the same employee was making before. Quite simply… it’s one foot forward (and God knows we’re thankful for any forward movement) and 3 steps back. While the Fed talks about lowering interest rates… which really is useless… Congress should be talking about taking energy products off the speculation boards… bringing the price of fuel down and getting rid of the Bush tax break. When the price of fuel goes down… the price of food and other goods will follow… though not as fast as we’d like. The domino effect here would actually be great… all the way to new housing starts, new car sales, etc. etc.  But the Fed move is like the magician’s move… in order to get his little trick done… he has to avert our attention. That’s what the Fed is doing.  And, no one wants to discuss the idea of putting a tariff on all the goods being manufactured for American companies in China, India and other foreign countries and then brought into this country to sell here.  What a mess!

  • Michael Gilman

    Question. How can we have growth if we continue in unsustainable government spending on overburdened Bureaucracies? How can we get more money from taxes? Will raising the tax rate cause an increase in income, or a fall due to people exiting the economy?

  • guest

    The solution should come from the US Government through Colleges and Universities. All our economic plans do not work as expected. Tax Revenues will help only when the businesses thrive giving rise to new business opportunities. We have to take a serious look at our Balance Sheet and go from there. There is nothing right on the left hand side and there is nothing left on the right hand side. There is no room for Growth when all we do is spending. Raising the Tax Rate will only put the Cart before the Horse.
    Wealth is there somewhere. Only problem is that it has not been distributed properly. Most Corporate Banks have money but they don’t want to invest in Project that would help develop the economy. Big Banks received huge chunk of bail out money from the Taxpayers. Is this Capitalism or Socialism? We need some strong leaders like FDR who invested in RailRoad, Airlines Projects. That is how America grew up stronger. Social Security brought some stability in this country. Now everything is uncertain in this country.
    Americans do not trust the Government or the Media or even the political leaders.

  • guest

    The sign ‘ Now Hiring’ has become ‘Not Hiring’

  • discountbrains

    Yes, but we’re in a “Global Economy’. Interesting how they throw that term around these days as if it is some act of nature like the weather and wasn’t constructed almost entirely by our own US companies.  Clinton under heavy pressure from the banks repealed the Glass-Stiegle act and you see the financial meltdown  that created for us. And, now this same group is still preaching this theology of ‘free-markets’ whereby US companies promptly shipped all production overseas. Until we learn to make our own toasters, refrigerators, shop tools, etc our economy will NOT improve. This is not the same as the isolationism of the 1930s because then we already were producing 95% of everything we used. Now its reversed. For industries we want back we should tell companies they have 2 years to produce 80% of what they sell here or they don’t sell it here.

  • Anonymous

    Professor Reich virtually always has teriffic insight and admirable forsight. I wish more people would listen seriously to his analyis of our financial quandry. We must bring back the middle class or the situation is hopeless.

  • Youngatheart5376

    when you have the RW tea party blocking any jobs bill the POUS ask for what do you expect., the right wing thinking just take out the Pres. no matter at what cost, hopefully the voters in all these districts that these obstructioist are are in will have the courage to vote them out before our country gets into a hole that we can never craw out. MY God , greed at what cost.

  • Rosehigh

    The employement numbers are produced by ADP.  I’d like to better understand how ADP determines this number, given that they do not process payroll from ALL employers.  It has been widely acknowledged that the recovery begins with small and medium sized employers.  ADP does not typically have access to these regional and remote job engines. 

    It would be helpful to discuss the source of the metrics and the methodology deployed to calculate this politically important number.