Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘Full Employment’

Still Getting 'It' Wrong

Tuesday, March 14th, 2017

On Friday, the U.S. Bureau of Labor Statistics reported the economy gained 235,000 payroll slots in February and upped its estimates for December and January by another 9,000 jobs. Over the three-month period, that means an average job growth of 209,000 jobs a month. Including the ups and downs, over the past 30 years, the U.S. economy has averaged job growth of about 126,000 jobs a month. So this current rate of growth would suggest a strong labor market. Further, workers who transitioned from being out of the labor force into active job search were 2.3 times more likely to land a job than to be stuck unemployed and looking.  And unemployed workers were 1.3 times more likely to find a job than if they were to quit and drop out of the labor force discouraged. Over the year, average wages (not adjusting for inflation) rose 2.8%.

Watchers of the Federal Open Market Committee, the policymaking body of the Federal Reserve Board, are sure the FOMC will stick to its forward guidance and act to raise the fed funds rate; which is their tool for setting the tightness of monetary policy. Raising the rate signals faith in the strength of the recovery by the Fed; a strong sense the economy is nearing both its target for inflation and employment. And, it is likely, given recent statements from several Fed officials that these numbers may convince them that “normal” is just around the corner. But they are wrong.

Raising interest rates is a way to slow the growth of the economy. It is useful to prevent an economy from over-heating and setting price increases on a pace that would be difficult to reign in. If done properly, the Fed can guide the economy to a soft-landing, where it will sit growing at a rate just fast enough to stay at full employment.

Well, the problem is that is where the economy is now. Despite solid job growth over the past year, the unemployment rate has remained flat and annual nominal wage growth has remained steady at around 2.6%. As a simple arithmetic, if the number of jobs created slows, then the unemployment rate will have to rise, and wage growth will slow.

If the near term had great economic certainty, then it might be possible to agree that labor market might show more signs of tightening; rather than its present “goldilocks” state of flat unemployment and wages. But the near term has great economic uncertainty.

First, while wages are beginning to show growth, the share of people employed is still a significant distance from the share employed at the peak of 2007, which was below the peak of 1999. This means that household incomes have not caught up. A large share of the workforce is employed part-time, and while the recovery has seen mostly growth of full-time jobs, household incomes have not gotten back to full employment levels.

Second, a major driver of the real economy is the automobile industry sector. After over-correcting during the depths of the Great Recession and the historic collapse in demand, it has used the financial helping hand then-President Barack Obama lent, to recover and now reach record sales and a growth in employment and investment. But a substantial and rising share of auto loans have been made to African American and Latino communities using subprime lending tools.  During the initial stages of the recovery, delinquencies on auto loans declined. But, beginning in 2016, they started to rise. And they continue to rise.

The purchase of new cars has increased the supply of used cars, so the gap between new car prices and used car prices has been rising as the price of used cars is falling. Delinquencies on auto loans began when the Fed began moving from zero interest rates, since the loan rate on automobiles is tied to short-term interest rates. Higher short-term rates will further increase consumers’ costs of buying a new car, increasing the wedge between new and used car prices.

The threat is that if job growth slows, it will first affect the African American and Latino communities, already showing struggles with the onerous terms of the subprime loans. Those communities need more time for the labor market to recover. The best solution for the economy is for their income to pick up pace and out run the debt. Income-led buying leads to healthy sustainable recoveries. Raising interest rates when incomes lead the recovery simply slow the pace of buying and encourage savings rather than spending. The worse solution is to have the debt out run their income. If delinquencies increase more, the auto market will get a greater flood of used cars, driving the price of used cars down further and increasing the gap in price between used and new cars.

Over the past six months, in fact, lending activity has become more stringent for new borrowers in the auto sector and for small business. Such a credit tightening is normally associated with an economic downturn; not a healthy growing recovery about to overheat. Higher short-term rates will only exacerbate that problem.

The problem is clear, at some point the new car market will go into recession; which means the auto industry will be in recession; which means the economy will be in recession.

Third, compounding the near term uncertainty, is the war that President Donald Trump has declared on the immigrant community. Fear and uncertainty are high in communities where many workers and family members are undocumented. These workers are fully integrated into our communities. They are wives, husbands and parents of legal residents and American citizens. These households live under a cloud. Fearing deportation, or legal fees to protect loved ones, millions of households are unlikely to buy new cars, or may be deciding to horde cash and stop making payments on cars that have been purchased. This is an uncertainty with a magnitude we have never faced, and therefore is too great a threat to ignore.

Fourth, the increase in people with health insurance because of the Affordable Care Act has meant job growth in the health sector at a faster rate than the rest of the economy. The current proposals of the Republican Congress to repeal the Affordable Care Act all will lead to a decrease in the number of Americans with health insurance. For this reason, the major hospital associations and the American Medical Association oppose the Republican plan. The threat to this market will have real repercussions on job growth in the one high-wage sector with fast job growth. And the wind down of federal Medicaid support to those states that extended health coverage using Medicaid will cause huge ripple effects on state budgets, which have not fully recovered from the drastic loss of revenues during the Great Recession. This will mean further pressures on recovering state investment in public colleges and universities.

Finally, the proposed budget cuts put forth by the Trump administration would gut public investment in education, housing and the environment. The austerity that has been proposed will cut federal jobs. And, just when the Medicaid cuts are going to hurt state budgets and so put more pressure to raise tuition at public two- and four-year colleges, the Trump administration is proposing cuts to Pell Grants and returning the student loan market to the more expansive private sector.

Thoughts that huge tax cuts to high-income households will offset a downturn in automobile sales, further disruption in the rising costs of college tuition or a dismantling of the health sector are irrational. We have lived through big tax cuts to the wealthy under former President George W. Bush. They were insufficient to pull the economy out of the 2001 downturn in any timely fashion; and, he had the help of low interest rates, a federal deficit swelled by tax cuts and war time expansion of military budgets, as well as a relatively healthy state unemployed insurance system. The current unemployment insurance system is greatly weakened and cannot provide the automatic stabilizer so vital to dampening a recession.

These all point to a real danger that the Fed may be a great threat to what is a more fragile economy than appears at the moment. The drive to be “normal” in a world that is clearly not normal, may put us in danger of a downturn that will be difficult to recover from given the instability shown in the White House.

This blog originally appeared in aflcio.org on March 13, 2017.  Reprinted with permission.

William E. Spriggs serves as Chief Economist to the AFL-CIO, and is a professor in, and former Chair of, the Department of Economics at Howard University. Follow Spriggs on Twitter: @WSpriggs.

Full Employment Is More Than Possible. It Is Essential.

Friday, September 19th, 2014

Dave JohnsonProgressives have not only been able to beat back the D.C.-elite effort to cut Social Security, we put the idea of expanding Social Security on the table instead. We pushed LGBT rights and gay marriage and have won significant victories. Sunday’s Climate March will force climate onto the map.

We got the discussion of income inequality going. We have achieved minimum wage increases and paid sick days in several cities and states. The National Labor Relations Board is functioning and we even saw labor-movement gains in the South this week. We have held back (so far) the drumbeat for big cuts in corporate taxes they’re calling “tax reform.”

Now it’s time to put our demand for full employment policies on the table. And guess what – it’s a great way to win elections!

What would it mean in people’s lives if there were more job openings than people? Right now people suffer terrible job fear that forces them to accept pay cuts, benefit cuts, extra hours and other things that increase profits for the giant corporations.

Think about the huge change in the mood and structure of the country if employers had to fight to get employees. If your boss couldn’t find the people needed to do the work and knew that you had three job offers, you might be getting a raise instead of a pay cut – and you would know that, too.

It has been a while, but imagine the situation in our economy if working people had the upper hand. This is what full employment would mean. And it is possible to achieve full employment – but only if We the People decide to just go ahead and pursue this, through our government.

How To Get To Full Employment

There are so many things we could be doing to bring about full employment. For example, this is the record of the 2009 “stimulus.” We were losing more than 800,000 jobs a month in the wake of the 2008 recession, then because of “government spending” we were gaining 100,000-250,000 jobs a month. Look at this chart and think, “No wonder Republicans don’t want more government spending to create jobs.”

Monthly_0208_0514[1]
This blog originally appeared in Campaign for America’s Future (Ourfuture.org) on September 19, 2014. Reprinted with permission.  http://ourfuture.org/20140919/full-employment-is-more-than-possible-it-is-essential

About the Author: Dave Johnson has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.

 

Did I Hear the Words "Full Employment"?

Thursday, August 1st, 2013

jonathan-tasiniAmong the many reasons the country would be better off if Bernie Sanders was president is that the man just refuses to deal in silliness. He wants the country to have a serious debate — and whether the next head of the Federal Reserve Board is a man or a woman, or the current president is more “comfortable” with one person or another running the Fed, is entirely irrelevant to Sanders. And, so, Sanders goes really wild — he invokes the two words that most people will not speak in this debate even though those two words are part of the Federal Reserve Board’s mission:  FULL EMPLOYMENT.

Last week, I tried to suggest that the critical questions are not being asked in the discussion about who should run the Fed. Sanders can actually communicate with the guy in the White House, as he does in this letter. The entire letter is worth reading but this is the paragraph that almost made me cry (I’m desperate here, politically speaking):

The top priority of the Federal Reserve Board must be to fulfill its full employment mandate. When Wall Street was on the verge of collapse, the Federal Reserve acted boldly, aggressively, and with a fierce sense of urgency to save the financial system. We need a new Fed chair who will act with the same sense of urgency to combat the unemployment crisis in America today that has left 22 million Americans without a full time job. [the underline and bold is in the original]

There is a lot to learn from this short letter.

First, how many people know, as Sanders points out, that it is the Fed’s responsibility to bring about full employment?

Wait a second: who even talks about full employment anymore? Not the Congress (except for a handful of people…or maybe it’s only Sanders). Not the president. Not either of the two parties.

It’s seen as, well, quaint. We’ve now adjusted our attitude, thanks to the constant chatter of the transcribers of press releases (formerly known as “journalists”), so that we now think of under 7 percent unemployment as somehow “okay” and 6 percent unemployment as if everything is going great guns…with the millions of people out of work that those numbers represent.

Obscene.

But, reaching full employment is the Fed’s job. And Sanders, wacky guy that he is, actually wants someone in the position who understands that. Uh, good luck with that, Bernie.

Correctly, Sanders targets the Big Three. No, not the auto companies. The Big Three who were key architects in the financial crisis: Robert Rubin, Alan Greenspan and Larry Summers. Those guys had a mission: destroy regulation, let Wall Street run wild and make themselves and/or their friends rich along the way.  To the president, who is out now talking about the divide between rich and poor, Bernie says: keep those turds away from the Fed (yes, he uses far more Senatorial language)

I got to have one quibble with Sanders, otherwise it will seem like hero worship (close). And that’s that he doesn’t call out in his letter the puppet master who laid the groundwork for this mess in the 1990s: Bill Clinton. Because it was the Big Dog himself who led the charge of the Big Three against Glass Steagall — which was the law that did not allow investment banking and commercial banking to mix.

But, if the world was right, and we had a serious political debate, Sanders’ letter would be driving policy the decision about who will be looking out for the interests of the people.

This article originally posted on Working Life on July 30, 2013.  Reprinted with permission. 

About the Author: Jonathan Tasini is a strategist, organizer, activist, commentator and writer, primarily focusing his energies on the topics of work, labor and the economy. On June 11, 2009, he announced that he would challenge New York U.S. Senator Kirsten Gillibrand in the Democratic primary for the 2010 U.S. Senate special election in New York. However, Tasini later decided to run instead for a seat in the House of Representatives in 2010.

Your Rights Job Survival The Issues Features Resources About This Blog