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A turning point for the US economy?
BUSH AND company were quick to claim a turning point in the
recovery of the US economy when the Bureau of Labor Statistics’ March figures
showed a gain of 308,000 new jobs. The February figures were also revised
upwards to 87,000 (originally announced at only 23,000). Previously, the highest
monthly job gain since the beginning of the recession in March 2001 was 119,000
– it requires a minimum of 150,000 new jobs a month to keep pace with the growth
of the labour force.
Does this really mark the end of the ‘jobless’ – or rather
the ‘job-loss’ – recovery and the beginning of a phase of broad-based growth?
The performance of the economy will obviously have an important, perhaps a
decisive, bearing on the outcome of the November elections.
By official criteria the recession following the bursting of
the stock exchange bubble was exceptionally mild and short lived, running from
March to November 2001. But in terms of job losses it has been the worst
recession since the 1930s. Since the beginning of 2001, 2.4 million jobs have
disappeared.
The March figures are an improvement over recent months, but
there are still 1.8 million fewer jobs in the US than in January 2001, with net
job losses of 1.5 million in 2002 and 331,000 in 2003. Although the economy grew
at an annualised rate of 6% during the second half of 2003, the average monthly
employment gain was about 100,000. The same growth of GDP in the 1990s produced
250,000 new jobs a month.
Bush has repeatedly claimed that his $3 billion tax handout,
mainly to the super-rich, was an economic stimulus and job-creation plan. The
results are meagre. Breakdown of the March figures indicates the uneven
character of current growth, which depends on the continuation of the housing
bubble and other kinds of credit-driven consumer spending.
The biggest gain was in construction (71,000 new jobs),
followed by retail (+47,000) and professional and business services (+42,000).
Manufacturing employment remained static, the first time since July 2000 that it
has not fallen.
The situation is far from rosy for millions of workers.
Under Bush, 2.8 million manufacturing jobs have disappeared (that is, more than
the total net jobs loss). Ohio, Michigan and Pennsylvania, states which
previously had big concentrations of heavy industry, have each lost 200,000 or
more manufacturing jobs since January 2001. These jobs have been partly replaced
by service-sector jobs, many of them temporary, part-time, low-paying and
without health benefits. About 4.3 million US workers were forced in 2003 to
accept part-timer positions (one million more than 2000).
Bosses are aiming at a ‘just-in-time’ workforce. "Companies
are trying to think of staff more like inventories, keeping things to a
minimum", says John Challenger, CEO of Challenger, Gray and Christmas, a big
employment agency. (Financial Times, 10 March) Temporary staff can easily be
dismissed if there is a downturn in business.
There are currently nearly 15 million unemployed in the US
(5.7% of the workforce), and the official figures understate the real level of
joblessness. Since the beginning of the year, more than a million jobless have
exhausted their unemployment benefits without finding work. Moreover, the rate
of insolvency of small businesses is rising, rendering more and more
self-employed workers effectively unemployed.
Labour force participation (the proportion of the
working-age population actually employed) has been reduced to the 1988 level, at
around 62%. This reflects the large numbers of ‘discouraged workers’, who need
work but have given up looking, and so disappearing from labour-force
statistics. Nearly a quarter of the unemployed have been looking for work for
over six months.
Another cause of job losses is the outsourcing or
‘offshoring’ of jobs to low-wage countries, which is arousing increasing alarm
amongst US workers. Not only manufacturing jobs are going abroad, but
white-collar work (accountancy, customer service, sales, etc) and software
design. Communications technology makes it possible to transfer previously
‘non-tradable’ jobs abroad. Estimates of this kind of ‘offshoring’ range from
500,000 to 995,000 since March 2001 (which would account for between 15% and 35%
of the total decline in employment). Bush’s chief economist, Gregory Mankiw,
provoked outrage amongst workers when he described the loss of US jobs to
overseas companies as "just a new way of doing trade". (Associated Press, 13
February)
Wages have generally stagnated during the weak recovery,
failing to keep up with inflation. In other words, most workers have suffered a
drop in real wages. Jobs in the growing sectors of the economy pay on average
20% less than jobs in the contracting sectors.
Low-paid workers have fallen even further behind. "Thirty
million US workers earn less than $8.70 an hour, the official US poverty level
for a family of four (most experts estimate that it takes at least double this
level for a family to provide for its basic needs)". (Beth Shulman: Working and
Poor in the USA, The Nation, 9 February) Low-paid jobs typically include
security guards, childcare, retail clerks, hospital orderlies, teachers’
assistants, hotel workers, cleaners, call centres, etc. Less than half workers
earning less than $20,000 get health insurance, and only one in five has pension
coverage.
Big business profits have been pushed up, mainly by ‘cost
cutting’, that is sacking workers and squeezing more out of the remaining
workforce. "To the extent that companies can squeeze another drop of blood out
of their existing work force, they’re doing it. Eventually, you reach the point
where there is no more blood to be given, but we haven’t reached it yet", says
Joshua Shapiro, chief US economist of Maria Fiorini Ramirez, a New York
economics research company. (International Herald Tribune, 6 March)
Working-class families are more dependent than ever on
credit to supplement their earnings. Debt now averages about 110% of household
income, while debt repayments are running at a record 13% of disposable income.
This is one of the main props of the consumer boom which has been driving the US
recovery.
The other prop is the housing bubble. In the last eight
years the rise in house prices has exceeded the general increase in retail
prices by 40 percentage points. Mortgage refinancing on the basis of higher home
values and low interest rates has channelled more money into consumer spending,
around $200 billion in 2003.
To help Bush, the Federal Reserve under Greenspan has been
pumping liquidity into the economy, with a 1% base interest rate and a massive
expansion of money supply. As Steven Roach, chief economist at Morgan Stanley NY,
warned business leaders at the Davos economic summit in January, "The main
engine of the global economy, the… US is right now running on fumes". The debt
bubble can’t last forever, however. Nor can the huge federal budget deficit
($500bn and rising) or the balance of payments deficit ($550bn and rising),
which are unsustainable. Bush is simply praying that none of these bubbles will
pop before 9 November – and to hell with the consequences after that.
Lynn Walsh
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