The New York Times
September 8, 2007
The Employment Tea Leaves
In the bad-news-is-good-news world of Wall Street, a lot of investors had been hoping for a lukewarm employment report yesterday because job weakness would help to ensure an interest rate cut when the Federal Reserve meets later this month. But not even the most self-interested could celebrate the report’s grim numbers.
Over all, employment contracted by 4,000 jobs in August, the first monthly decline in four years. The job-creation tallies for June and July were also revised downward, bringing average monthly job growth for the past three months to less than a third of what’s needed simply to absorb new people entering the job market.
Suddenly, analysts are talking about a possible recession. And that’s not good news for anybody.
Wall Street may well get its rate cut — the Fed will decide no later than Sept. 18. But the poor job numbers suggest that any bang a rate cut might give the financial markets would be muted by the apparent sharp slowing in the broader economy. Manufacturing and construction continued to lose jobs in August, a sadly common occurrence in today’s economy. But job growth in the professional and business sector, which includes employees in legal, accounting and management services, has also been very weak.
If there is any good news here it is that hardship may be setting the stage — in this pre-election year — for a national discussion about what needs to be done to fix the economy and help the increasingly squeezed middle class.
The Republicans will almost certainly renew their calls for tax cuts on investments and multimillion-dollar estates, arguing that such cuts would pump up the economy. But lower taxes for the rich would not benefit the middle class and would only worsen the budget deficit. Republicans may also continue to champion financial deregulation as a way to juice the economy. But that led to the housing bubble — and the current mortgage mess.
Democrats, or some Republicans with a change of heart, must articulate — and Americans must demand — a program for ensuring that the middle class gets a bigger share of the economy’s spoils than it has received during the Bush era, when gains have largely been funneled to the richest Americans.
To have a fairer and more inclusive economy, workers need true mobility, which requires health care reform. And they need to see a reversal in the country’s ever-deepening inequality, which could come about through more progressive income taxes, better public education and more help for workers whose jobs are displaced by globalization.
A few more months like August would make a recession likely. That would presumably focus the nation on the need for new economic priorities. But the unacceptable costs of staying the course are already clear. The sooner the debate heats up, the better.