-- greater numbers of households unable to meet expenses, even with two working members;
-- added duress from state budget cutbacks;
-- record numbers of food stamp recipients;
-- persistent and growing hunger and homelessness; and
-- job losses and higher unemployment continuing for many more months with some analysts projecting record high numbers before peaking.
A September 11 Kissinger Associates Joshua Ramo story in Time magazine highlighted the problem. Titled, "Jobless in America: Is Double-Digit Unemployment Here to Stay," it quoted Larry Summers' remarks last July before the Peterson Institute for International Economics about the disturbing rate of job losses. He suggested something strange was happening, unpredicted by experts:
"I don't think that anyone fully understands this phenomenon," he said. Will job losses mount longer than expected? At the "recession's" end, will low numbers of new ones follow, and will double-digit unemployment persist and remain common?
Without saying it, Summers wondered if America's economic model was broken, and if so how to fix it. Or can it be fixed? According to the Peterson Institute's Jacob Kirkegaard, "It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem."
Summers earned his reputation as an employment theorist. He now believes that earlier unemployment views are "importantly wrong. I thought if you could have areas where there was long-term substantial unemployment, then that raised some questions about the functioning of markets."
In 1986, he wrote an article titled, "Hysteresis and the European Unemployment Problem." Hysteresis is the Greek word for late, referring to what happens when something snaps and can't be fixed. It's an idea economists deplore applying to economies, preferring instead to cite normal business cycle ups and downs. Yet in 1986, Summers argued that Europe's unemployment might be chronic and persist in times of growth.
Today's are another matter at a time of a changing economic landscape perhaps suggesting that hysteresis is confronting America, and many lost jobs aren't coming back, especially better paying ones. That's Kirkegaard's view in saying growth won't put Americans back to work, and new jobs created will be poorer quality than old ones.
So what can be done going forward? Unlike in the 1930s, machines now do much of the work that people did then on infrastructure projects. And it's a lot harder converting white collar workers to blue collar ones. Moreover, Summers' own research concludes that the traditional Western economic model won't alleviate the jobs crisis, so what will?
Summers won't say it, but short of a total remake of "free market" economics, likely nothing and perhaps that's America's future with growing millions consigned to a permanent underclass, while an elite few at the top grow richer, until one day "hysteresis" snaps the system in a disruptive convulsion, the old model passes from the scene, and nothing is the same again.
More Evidence of Economic Duress in the Latest Federal Research Report on Consumer Credit
On September 8, the Federal Reserve reported that total consumer credit fell by a record $21.6 billion in July (the sixth consecutive monthly decline) and year-over-year by $2.47 trillion or 10.4%. According to Bernard Baumohl, The Economic Outlook Group's chief global economist:
"It is one more important sign that consumers are not going to be contributing very much to the economy for the balance of this year and probably for (at least) a good part of next year." Shrinking credit's impact on consumption indicates an economy in decline. It shows up in growing poverty, falling incomes, and greater duress for growing millions, sure to be reflected in the Bureau's 2009 report.