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US slowdown intensifies global economic crisis

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US economic growth slowed in the first quarter of 2012, with gross domestic product rising by only 2.2 percent, according to figures reported by the Department of Commerce Friday. The figure was well below the consensus forecast of 2.6 percent among corporate economists surveyed by Dow Jones Newswires.

The figure suggests that job creation in the United States will remain in the doldrums, and that the unemployment rate may rise above the current official level of 8.2 percent, after falling from 9.1 percent over the past six months.

It comes as the global capitalist economy continues to stagnate, with the major economies of Europe -- Germany, Britain, France, Italy and Spain -- all either entering a double-dip recession or on the brink of doing so. Japan is also in recession, and economic growth in China and India has slowed significantly, well below the 10 percent rates of recent years.

World capitalism remains poised on a knife-edge, threatening a renewed global financial crisis that could be triggered by potential shocks, whether debt defaults by Greece and a half dozen other countries in the eurozone, a financial implosion like the Lehman Brothers collapse in 2008, or the outbreak of war in the oil-rich Middle East or some other international flashpoint.

The Commerce Department report shows that the United States cannot serve as an engine of global economic recovery, as it did in decades past. American corporations are awash with cash -- an estimated $2 trillion at least -- but they find it more profitable to buy back their own stock than to invest in production.

The agency said the slowdown in US GDP growth "primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment." In other words, it was the byproduct of the refusal of major corporations to build new buildings or buy computers and equipment.

The category of "nonresidential fixed investment" actually showed a decline of 2.1 percent in the first quarter of 2012, compared to a rise of 5.2 percent in the fourth quarter of 2011. Businesses also slowed their accumulation of inventory, evidently anticipating they would have difficulty selling any excess goods.

Another major contributor to the slowdown was a 3.0 percent decline in government spending, as local, state and federal governments have all cut back. This follows a 4.2 percent drop in government spending in the fourth quarter of 2011.

Concluding a two-day meeting of the US central bank, Federal Reserve Board Chairman Ben Bernanke said there would be no additional efforts to stimulate job creation. The Fed projects unemployment to remain at 8 percent through the end of this year, declining only to 7 percent in 2013 and 6.7 percent in 2014.

This means that millions of workers will remain jobless more or less indefinitely. Nearly 25 million workers are either unemployed, underemployed or have dropped out of the labor force because they cannot find work. According to a report last week by the Associated Press, more than half of all college graduates younger than 25 years old are either unemployed or underemployed.

At a press conference concluding the session, Bernanke rebuffed comments from liberal critics who had urged action to stimulate the economy and create jobs. "The question is, does it make sense to actively seek a higher inflation rate in order to achieve a slightly increased pace of reduction in the unemployment rate?" he asked. "That would be very reckless."

The Fed chairman was arguing that inflationary policies would not achieve a significant increase in jobs, tacitly declaring that the central bank could not compel corporations to hire workers if there was no prospect of making a profit from their labor.

Moreover, according to press accounts, there is considerable opposition among the Fed governors to any further measures to loosen credit, with some officials wanting to raise interest rates above the current near-zero level to demonstrate determination to fight inflationary pressures -- i.e., to prevent workers from demanding wage increases.

The US Labor Department reported Thursday that new applications for unemployment benefits remained virtually unchanged last week at 388,000, down only 1,000 from the previous week, which was the highest since January 7. The weekly figure had fallen to 355,000 at the end of March, then jumped by 30,000 a week throughout the month of April, in part because of large numbers of layoffs of public school employees.

Other US economic reports were as gloomy as the GDP figures. The Commerce Department reported April 25 that durable goods orders fell 4.2 percent in March, the biggest decline since January 2009, when the US economy was in free fall. The agency also revised its February durable goods estimate downwards, from a 2.4 percent rise to a 1.9 percent rise.

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Patrick Martin writes for the World Socialist Website (wsws.org), a forum for socialist ideas & analysis & published by the International Committee of the Fourth International (ICFI).

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