Klein's Commentary

Go beyond the headlines

The Jobs Week That Wasn’t

Bad news on U.S. employment numbers last week (a paltry 69,000 new jobs) left many wondering how long it might take for this economy to reach escape velocity from a slow burn. A scrappy little California start-up, SpaceX, made it to the international space station and back. What’s taking the rest of the country so long to recover?

Bureau of Labor Statistics employment data* (2002-2012) show the depths of the crisis and partial rebound. Beyond how steep the initial decline and gradual the return that little flatlining from January 2012 onwards is even more troubling. Even at an average 150,000 new jobs per month pre-crisis employment numbers are still 2 1/2 years away which would mark a total 80 months for full recovery. Compare that to previous recessions at the mind-numbing depths become painfully obvious.

The 1990-1993 recession (34 months forĀ  employment recovery) and the 2000-2003 tech bubble burst (27 months) look like speed bumps compared to the present sink hole of unemployment.

Perhaps those 2007 employment levels were artificially high to begin with considering all of the new homes being built and the incredible levels of household debt-fueled spending. On the positive side at least the economy is growing at roughly 2% and 4.2 million new jobs have been created. It could be worse (Greece or Spain).

Still the disconnect between top line gross domestic product (GDP) growth, financial sector recovery (seven out of the ten largest U.S. banks reported significant 1Q 2012 profits), and incredibly anemic job growth poses some troubling questions for a middle class recovery, if there is one at all. The National Economic Council’s Alan Kreuger gave a detailed speech to the Center for American Progress back in January detailing the hit on the middle (good graphs in the Reuters summary.)

The slow pickup in lending to small and medium sized enterprises (SMEs) contributed to the problem. The WSJ reported back in May that the U.S. lagged other countries in lending and the largest banks were slower than all the rest. Recent lending levels seem to have recovered, but how much is actually feeding into SME growth rather than say mergers and acquisitions remains unclear.

We know SMEs drive new job creation, especially during recessions and yet they still struggle to get access to capital. Even for new and innovative companies venture capital funding is down 35% in the first quarter of 2012 compared to the same period a year ago and far from its 2008 peak. Perhaps the crowdfunding movement will take its place. Websites like kickstarter.com, previously home to small project donations for everything from documentary films to food trucks, broke the funding bar at $7 million for a start-up hi-tech watch company. The new JOBS Act expands funding for equity. NowStreetJournal has been chronicling this rise in crowdsourced funding. Perhaps the middle will support the middle after years of the top taking care of themselves.

* Note: BLS employment figures are in thousands (left axis)

Brian • June 4, 2012


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