|SocialismToday Socialist Party magazine|
A turning point for the US economy?
BUSH AND company were quick to claim a turning point in the recovery of the US economy when the Bureau of Labor Statistics’ March figures showed a gain of 308,000 new jobs. The February figures were also revised upwards to 87,000 (originally announced at only 23,000). Previously, the highest monthly job gain since the beginning of the recession in March 2001 was 119,000 – it requires a minimum of 150,000 new jobs a month to keep pace with the growth of the labour force.
Does this really mark the end of the ‘jobless’ – or rather the ‘job-loss’ – recovery and the beginning of a phase of broad-based growth? The performance of the economy will obviously have an important, perhaps a decisive, bearing on the outcome of the November elections.
By official criteria the recession following the bursting of the stock exchange bubble was exceptionally mild and short lived, running from March to November 2001. But in terms of job losses it has been the worst recession since the 1930s. Since the beginning of 2001, 2.4 million jobs have disappeared.
The March figures are an improvement over recent months, but there are still 1.8 million fewer jobs in the US than in January 2001, with net job losses of 1.5 million in 2002 and 331,000 in 2003. Although the economy grew at an annualised rate of 6% during the second half of 2003, the average monthly employment gain was about 100,000. The same growth of GDP in the 1990s produced 250,000 new jobs a month.
Bush has repeatedly claimed that his $3 billion tax handout, mainly to the super-rich, was an economic stimulus and job-creation plan. The results are meagre. Breakdown of the March figures indicates the uneven character of current growth, which depends on the continuation of the housing bubble and other kinds of credit-driven consumer spending.
The biggest gain was in construction (71,000 new jobs), followed by retail (+47,000) and professional and business services (+42,000). Manufacturing employment remained static, the first time since July 2000 that it has not fallen.
The situation is far from rosy for millions of workers. Under Bush, 2.8 million manufacturing jobs have disappeared (that is, more than the total net jobs loss). Ohio, Michigan and Pennsylvania, states which previously had big concentrations of heavy industry, have each lost 200,000 or more manufacturing jobs since January 2001. These jobs have been partly replaced by service-sector jobs, many of them temporary, part-time, low-paying and without health benefits. About 4.3 million US workers were forced in 2003 to accept part-timer positions (one million more than 2000).
Bosses are aiming at a ‘just-in-time’ workforce. "Companies are trying to think of staff more like inventories, keeping things to a minimum", says John Challenger, CEO of Challenger, Gray and Christmas, a big employment agency. (Financial Times, 10 March) Temporary staff can easily be dismissed if there is a downturn in business.
There are currently nearly 15 million unemployed in the US (5.7% of the workforce), and the official figures understate the real level of joblessness. Since the beginning of the year, more than a million jobless have exhausted their unemployment benefits without finding work. Moreover, the rate of insolvency of small businesses is rising, rendering more and more self-employed workers effectively unemployed.
Labour force participation (the proportion of the working-age population actually employed) has been reduced to the 1988 level, at around 62%. This reflects the large numbers of ‘discouraged workers’, who need work but have given up looking, and so disappearing from labour-force statistics. Nearly a quarter of the unemployed have been looking for work for over six months.
Another cause of job losses is the outsourcing or ‘offshoring’ of jobs to low-wage countries, which is arousing increasing alarm amongst US workers. Not only manufacturing jobs are going abroad, but white-collar work (accountancy, customer service, sales, etc) and software design. Communications technology makes it possible to transfer previously ‘non-tradable’ jobs abroad. Estimates of this kind of ‘offshoring’ range from 500,000 to 995,000 since March 2001 (which would account for between 15% and 35% of the total decline in employment). Bush’s chief economist, Gregory Mankiw, provoked outrage amongst workers when he described the loss of US jobs to overseas companies as "just a new way of doing trade". (Associated Press, 13 February)
Wages have generally stagnated during the weak recovery, failing to keep up with inflation. In other words, most workers have suffered a drop in real wages. Jobs in the growing sectors of the economy pay on average 20% less than jobs in the contracting sectors.
Low-paid workers have fallen even further behind. "Thirty million US workers earn less than $8.70 an hour, the official US poverty level for a family of four (most experts estimate that it takes at least double this level for a family to provide for its basic needs)". (Beth Shulman: Working and Poor in the USA, The Nation, 9 February) Low-paid jobs typically include security guards, childcare, retail clerks, hospital orderlies, teachers’ assistants, hotel workers, cleaners, call centres, etc. Less than half workers earning less than $20,000 get health insurance, and only one in five has pension coverage.
Big business profits have been pushed up, mainly by ‘cost cutting’, that is sacking workers and squeezing more out of the remaining workforce. "To the extent that companies can squeeze another drop of blood out of their existing work force, they’re doing it. Eventually, you reach the point where there is no more blood to be given, but we haven’t reached it yet", says Joshua Shapiro, chief US economist of Maria Fiorini Ramirez, a New York economics research company. (International Herald Tribune, 6 March)
Working-class families are more dependent than ever on credit to supplement their earnings. Debt now averages about 110% of household income, while debt repayments are running at a record 13% of disposable income. This is one of the main props of the consumer boom which has been driving the US recovery.
The other prop is the housing bubble. In the last eight years the rise in house prices has exceeded the general increase in retail prices by 40 percentage points. Mortgage refinancing on the basis of higher home values and low interest rates has channelled more money into consumer spending, around $200 billion in 2003.
To help Bush, the Federal Reserve under Greenspan has been pumping liquidity into the economy, with a 1% base interest rate and a massive expansion of money supply. As Steven Roach, chief economist at Morgan Stanley NY, warned business leaders at the Davos economic summit in January, "The main engine of the global economy, the… US is right now running on fumes". The debt bubble can’t last forever, however. Nor can the huge federal budget deficit ($500bn and rising) or the balance of payments deficit ($550bn and rising), which are unsustainable. Bush is simply praying that none of these bubbles will pop before 9 November – and to hell with the consequences after that.