If you feel like you’re getting a sense of déjà vu, you’re probably right. If this slowdown continues, this will be the third straight year that job growth has deteriorated in the spring after many thought the economy had turned the corner in the winter. Compare the last two months, which have averaged 73,000 jobs added with the first quarter of 2012, which saw averages of 226,000, and it is clear that we should be concerned.
The most unfortunate aspect is that, in many ways, the pain that is being experienced is self-inflicted. Europe’s recession is largely due to austerity policies. Following an initial stimulus package in 2009, the US has also pursued deficit reduction at the expense of job creation. And there does not appear to be much relief on the horizon. Instead of spending to help jump start job growth, Republicans and, to a lesser extent, Democrats, are proposing more austerity to come in some form or another. All of this is occurring while the US could borrow at 1.45% in order to invest in ourselves. Any person, business (and in this case, government) would be foolish to not take advantage of that opportunity if it were presented to them, given that the return on that investment would almost certainly be higher than the cost.
Further, if one is worried about future deficits and borrowing costs, there is a clear solution to that as well. As Felix Salmon points out, corporate profits are at an all-time high, accounting for more than 10% of GDP, which is unprecedented. And yet, they still are not hiring. If that’s the case, it’s becoming relatively clear that taxing them more would not hurt job growth, and the increased revenue from a higher corporate tax rate could certainly offset any additional spending by the government to invest in the economy.
Therefore, contrary to what many may say, the problem, and the subsequent solution are not that complex. Instead, the politics are. This leaves two options for the black community: (1) change the climate and the characters in Washington or (2) find the best ways to take advantage of the few bright spots in the current economy. Pursuing both options would be ideal.
What I didn’t get a chance to elaborate on in the piece is that it’s really starting to be a broken record. In 2010, after a couple months of good economic data, the Obama administration started talking about a “Recovery Summer” only to have the bottom fall out soon after. In 2011, after job growth early in the year, Washington became enthralled by the debt ceiling showdown and Obama and Boehner started negotiating Grand Bargains and Super Committees only to have the bottom fall out soon after. And this year, job growth early in the year, followed by….you get my point.
However, unlike the past two years, this situation may be even worse. Europe is in a recession and it looks like it’s going to deepen in the near term. Emerging economies are slowing as well, with India’s growth for the last quarter being 5.3% (compared to 9.2% for the same period a year ago) and China being rumored to be in a recession. Therefore, we really don’t have much room for buffer as an economy, both domestically or internationally. Not to be alarmist, but a full blown global recession is feeling increasingly possible.
And yet, it is avoidable and addressable…but our “leaders” either aren’t able or willing. I’m not sure which is worse at this point….