Reich Calls It A Depression
Thanks for blowing my whole weekend, Robert Reich.
The March employment numbers, out this morning, are bleak: 8.5 percent of Americans officially unemployed, 663,000 more jobs lost. But if you include people who are out of work and have given up trying to find a job, the real unemployment rate is 9 percent. And if you include people working part time who'd rather be working full time, it's now up to 15.6 percent. One in every six workers in America is now either unemployed or underemployed.
Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can't find another, or is trying to enter the job market and can't find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses [...]
This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.
I agree with Tim Fernholz - this whole notion that employment is a "lagging indicator" of the economy is dangerously out of balance. 663,000 people had their lives turned upside down in the last four weeks. Fixing their situation and getting them working again is actually the MEASURE of the economy, in my opinion.
So how do we do it? Obviously, the stimulus funds already in the pipeline and just starting to make their way out to the public will help. But Reich argues we'll need much more. Brad DeLong has some macro-economic ideas, including additional government spending, central banks buying government bonds, and boosting financial asset prices. I don't know exactly what needs to be done, and I'm willing to wait to see how this initial stimulus affects employment before calling for a new one. But this is a very tough time in the economy, and with the lack of retirement savings leading our elderly to the want ads, I'm just very worried about how we're going to come back.