A presidential confab to create jobs won't work. Rethinking some of Obama's policies might.
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You'd have to be mighty isolated not to know someone who has been laid off, forced into early retirement, or forced back to work and unable to find a job. Unemployment of 10.2 percent is still below the post-World War II peak of 10.8 percent of late 1982 but, by other measures, the job market hasn't been this bad since the Great Depression. More than a third of those out of work have been without a job for longer than six months, a postwar record. Counting those who involuntarily have only part-time work and those who would like a job but have stopped looking, the "underemployment" rate is 17.5 percent, another postwar peak. (Click here to follow Robert Samuelson).
The White House jobs "summit" Thursday will try to revive employment growth, but it will be a hard slog. Job creation is fundamentally a private-sector process, and the private economy is experiencing a broad retreat from credit-driven spending. Mark Zandi of Moody's Economy.com reports this astonishing figure: since last spring, the number of bank credit cards has dropped 100 million, about 25 percent. Banks are tightening credit standards (partly in reaction to new credit-card legislation designed to protect borrowers from rate increases) and consumers are canceling cards.
Meanwhile, empty office buildings, shuttered retail stores, and underutilized factories have depressed business investment spending. In the third quarter it was down 20 percent from its 2008 peak. Despite huge federal budget deficits, total borrowing in the economy dropped in the first half of the year; that hasn't happened before, in statistics dating to 1952.
Companies hire mainly when they see greater demand for their products and believe that extra workers will generate higher profits. More jobs then elevate confidence and demand. But for now, the logic is running in reverse. To restore profitability, companies are firing workers, and the ensuing pessimism erodes confidence and spending. Beyond households' $12 trillion loss in net worth, mostly reflecting lower stock and home values, Americans are saving more to guard against joblessness, lost overtime, or lower wages.
The good news is that the bad news may be peaking. Surplus inventories are declining; new orders will spur production. There is pent-up demand for cars and appliances. The devastated housing market is showing signs of revival--more sales, stable prices. Initial claims for unemployment insurance have dropped, as have monthly job losses (from about 700,000 per month early in the year to about 200,000 recently). Corporate profits have recovered from lows, easing pressure for layoffs.
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