The rumors of an economic recovery are greatly exaggerated. The data on which Foley and others drawing similar conclusions rely when scrutinized point to a different conclusion. The recent June jobs report disguises bad news. Full-time employment fell in June by 523,000, while part-time employment rose by 800,000, thus yielding a nominal job growth of 288,000. Celebrating the loss of more than a half million full-time jobs is perverse.
Aggregate employment growth has not been sufficient to absorb young people entering the job market for years. Labor force participation remains at a 36-year low. If part-time employment were not considered full-time for unemployment rate purposes, the “rate” would not be 6.1 percent. If those who have quit looking for employment were counted as unemployed, as most certainly are, the unemployment rate would be closer to 10 percent than 6 percent. This is not the stuff of a sound expansion.
What about the Dow 30 above 17,000 and the S&P 500 at almost 2000? Is this not a sign of economic strength? It is for some.
Facing sluggish growth after several failed efforts that included literally trillions of dollars of deficit spending, the Administration and its allies at the Federal Reserve moved to “quantitative easing,” a program designed to produce a “wealth effect” as a means of stimulating the economy. By pushing stock prices up, so the “wealth effect” theory goes, the investor class (aka “the 1 percent”) will lead the nation out of the economic doldrums as they increase their capital and consumption spending.
In what must be the greatest political irony of all time, the Administration openly embraced what amounts to “trickle down” policies to get the economy moving.
And it is working to some degree. The Hamptons and Beverly Hills have never had it so good. The precincts of the rich and famous are doing very well indeed. Luxury-good retailers are turning record profits. High-end real estate and autos are selling very well. Rising equity prices are improving the balance sheets of the investor class but have not created the kind of economic expansion that a nation of 310,000,000 needs.
The limited success achieved by “quantitative easing” has led the Obama Administration to return to residential underwriting standards that will increase real estate prices in general and residential prices in particular.
The Administration recently dismissed Edward DeMarco, who resisted valiantly the attempt to return us of the days of a real estate bubble and replaced him with a politically reliable Melvin Watt, whose task it will be to make borrowing easier and thus create demand for new and existing housing.
The Obama Administration is returning to the days of assets bubbles as it vainly looks for short term results that will permit it to praise its efforts at getting the national economy moving again. Let’s hope the cost does not exceed the benefit.
Reliance on data from one quarter, never mind one month, is risky at best. Handing out political credit based on June employment growth, without simultaneously, addressing the significant decline in work force participation that continues at a 36-year low and the falling full time employment opportunities for middle class workers and retirees is incomplete.
Foley expresses concern about what has become the economic concern de jour of the political progressives, to-wit: growing income and wealth disparity. Let us assume he is correct about his claim although there are significant questions whether data on which Mr. Foley and current income inequality guru Thomas Piketty have relied to conclude there is rising inequality. That, however, is a subject for another day.
Those concerned with growing income and wealth disparity need to come to terms with the Administration’s support for policies that have explicitly embraced enhancing “wealth” of the investor class to spur economic growth.
What is clear is that the Administration and its allies at the Federal Reserve, having tried everything else in the Keynesian quiver, have embraced “trickle down economics” as the road to restore prosperity.
When are those concerned about income and wealth disparity going to start looking at Barack Obama and his “wealth affect” policies rather than posturing against the Republicans in the House of Representatives who they claim have done nothing but obstruct the road to economic Nirvana? What is it they would have the House do? Anyone have any idea?
Daniel Joy is an attorney in Marietta.