Real estate billionaire and publisher Mort Zuckerman in a distraught op-ed in the Wall Street Journal lists ten indications that the economy is “even worse than you think”. They include
- June’s unemployment figures are understated
- The number of workers taking unpaid leave
- Too many “discouraged workers”
- People taking part-time jobs
- Decline in the work-week
- Average length of unemployment the highest since records have been kept
- No wage gains
- Manufacturing sector losing the most jobs
- Few prospects for job creation
He also gives low marks to the stimulus, largely on the grounds that it doesn’t do what most needs doing.
To his mournful list I’d add that housing, the sector that has frequently lead the way out of recessions, has little or no chance or serving that function this time around. There’s a glut of housing and commercial building isn’t in a much better state. There is no hope whatever that growth in the government, education, and healthcare sectors, the only sectors currently showing expansion, will lead the way to a recovery.
I’ve expressed my opinion before: what’s needed for a recovery is domestic capital investment which in turn requires realistic expectations of gain, a straightforward, predictable, and non-hostile regulatory environment, and a confident financial system. Those are the directions in which we need to go and I don’t see the first moves in that direction right now.
I’d point out that we have had anemic wage gains for some time and that most of the increase in compensation is in benefits. As for manufacturing jobs…he’s just now realizing this. Globally manufacturing jobs are going away. Its called technological advancement. What is this weird fetishization with manufacturing jobs?
Oh and regarding this,
Because we have a President and Congress that view a friendly and stable regulatory structure as inimical and who have tremendous incentives to keep the financial sector from being reformed.
Also, the President and Congress want to add considerable regulatory uncertainty to the current economy with the cap-and-trade set up for greenhouse gases and global warming. It is going to work very much like a tax in terms of the outcome, but the actual mechanism is going to be rather chancy at best. IIRC Europe’s experience with such a system has not been all that great.
For example we have this story,
*Managers at the factory say their plant as an ecological standout: They use waste gases to generate energy and have installed the latest pollution-control equipment.
*But Europe’s emissions program has driven electricity prices so high that the facility routinely shuts down for part of the day to save money on power, which, contrary to environmental goals, reduces energy efficiency.
*Although demand for its products is strong, the plant has laid off 40 of its 130 employees and trimmed production.
*Two customers have turned to cheaper imports from China, which is not covered by Europe’s costly regulations.
Note it reduces energy efficiency, it has cost jobs and output. Not exactly a grand policy for promoting investment.
Any bets that U.S. policy will be just as ill-thought out, will have similar perverse incentives, and in the end wont do much to stop global warming?
Congratulations.