The Bureau of Labor Statistics is out with its monthly update on the job market, and it looks as if the U.S. economy continued to muddle along at a rate of growth about equal to the growth rate of the population. Last month, private sector firms added 142,000 jobs, but state, local and federal government cut 29,000, for a net gain of just 113,000 jobs. Economists had a consensus estimate of 185,000 jobs, so the report is another disappointment, but the official unemployment rate did fall to 6.6%.
But, as Meteor Blades put it:
“As the Economic Policy Institute has pointed out, to get back to pre-Great Recession levels by 2017, we need job growth of 285,000 a month. If that level could be maintained, it would mean the job recovery would have taken 10 years since the Great Recession began. In the post-World War II era, the United States has never gone 10 years between recessions.”
At the same time that the economy continues to stutter, and inflation, which is the real worry, is far under expectations, the Federal Reserve, and its new, Dovish leader Janet Yellen continued cutting back on measures to help spur the economy to the growth it NEEDS. This month, the Reserve announced that it would cut back its monthly bond-buying to $65 billion per month, from $75 billion the month before, and $85 billion for many months prior to that.
The fact that Yellen and former Federal Reserve Chair Ben Bernanke are considered by many to be extremely dovish- too interested in fighting unemployment at the expense of inflation and the risk of asset bubbles- and yet they are still pulling the plug on Quantitative Easing way too early.
Unfortunately, when it comes to macroeconomics, the political spectrum is encompassed entirely on center right to right side of what we would consider the normal American political spectrum. In this spectrum, the interest of the rich in not seeing inflation run high, eating into their considerable savings, far outweigh the interest of the poor in allowing inflation to be higher to stimulate demand, and therefore a lower unemployment rate.
Why is this just “the way it is” in macroeconomics? I don’t know. I could throw out some theories- most heads of Federal Reserve Banks and foreign Finance Ministers have plenty of money, and the company they keep has a LOT of money- is a popular one. Or another: the Senate, which still allows the filibuster on all non-judicial nominees (for now), makes all nominees significantly more “mainstream” because they must be able to garner 60 votes in a Senate that will always include at the very least 35-45 Republicans.
Whatever it is, though, it continues to be a problem. Just like in 1939, when the same ridiculous conventional wisdom we have seen take hold in the past few years reigned supreme, and the Government ceased supporting the economy far too early, leading to a disastrous plunge right back into the depression they had just emerged from. Just like in 1929, the rich control an outsized portion of the political power in our democracy, and just like in 1929, it is having disasterous effects on our country’s macroeconomic policy decisions.