Waiting for Lefty
The economy is plainly stuck in second gear. For the third month in a row, new job creation in June, at just 80,000, was barely enough to keep the unemployment rate from rising, and not nearly sufficient to accommodate new entrants to the labor market and unemployed people looking for work.
Not only did the private sector fail to create enough jobs. With the crisis in state and local budgets and the absence of federal aid, the loss of public sector jobs continued. Ordinarily in a slump, public employment takes up some of the slack. In this recession, government has shed 627,000 jobs.
Here’s the deeper worry. Not only could a weakening economy cost Barack Obama the election — this slump could literally go on indefinitely.
In the aftermath of a financial collapse, the economy gets stuck in a downward spiral. Banks are too traumatized to lend, businesses see too few customers to invest, and there is too little purchasing power among consumers who are either out of work or who haven’t seen a raise in a decade. The housing bust only adds to the downward drag.
Exports have been a bright spot, but as Europe succumbs to a similar vortex of recession compounded by austerity, Europe’s even worse economic woes are likely add to America’s.
Something similar happened in the late 1930s. Though economic growth returned, it wasn’t strong enough to repair the damage of the Great Depression or create enough jobs. Despite the New Deal, unemployment remained stuck at around 12 percent.