A New Horror Movie is in the Works: The Incredible Shrinking Middle Class
The news on the unemployment rate is not only welcome news, but further evidence that after a horrific summer the
economy is demonstrating a sustained stronger recovery than has previously been expected. The November unemployment rate drop to 8.5% follows stronger growth in the third quarter and raises expectations of a strong holiday shopping season and a good growth report for the 4th quarter. U. S.
For people who have been unemployed getting a new job is fantastic, rescuing them from not only the economic ravages of unemployment but from the social and emotional turmoil as well. It is also good news for the Obama Administration, that was beginning to run out of time for any economic recovery that can aid the re-election campaign. Let’s hope Mr. Romney can hide his disappointment at the numbers.
But getting a new job may not be the same as regaining former status. If a survey is correct (and there can be major flows in people’s perception of their economic condition) it appears that almost no one who is regaining employment is doing so at their previous level of compensation and benefits.
According to the study, to be released Friday by the John J. Heldrich Center for Workforce Development at Rutgers, just 7 percent of those who lost jobs after the financial crisis have returned to or exceeded their previous financial position and maintained their lifestyles.
The vast majority say they have diminished lifestyles, and about 15 percent say the reduction in their incomes has been drastic and will probably be permanent.
If this is accurate, it means there will be a tremendous drag on economic growth. The nation thrives on demand for goods and services by consumers, who in turn use income and debt to fund that demand. If income is not rising and debt cannot rise then increased demand will be too low to generate the 3.5% to 4.5% level of growth needed for a strong sustained jobs recovery. It also explains why a huge number of people have left the labor force, as the reccent labor report found.
And like many trends, the increase in jobs has not been uniform. In fact, areas where job cuts were the greatest have turned out to be areas were new hiring is the least.
The sectors that have been slowest to recover are those that endured the most acute job losses, like construction and state and local government. Construction workers are among the biggest sufferers, stung by a housing collapse that led to the loss of two million jobs. Since the recovery began, the industry has added just 47,000 jobs. . . . “This recovery is really not a fair and balanced recovery,” said Scot Melland, chief executive of Dice Holdings, an online job search service. “There are certain sectors that have done well, and others that haven’t done well at all. If you’re in one of the losing sectors, it’s very tough.”
So what should be done to further the recovery and help those most affected. Job training programs are one, increasing construction jobs through infrastructure projects is another, tax breaks for low income and middle income people is still another. What do Republicans want to do? Lower taxes on the wealthy. How will that help? We don’t know but if we ever figure it out we’ll get back to you.