Tuesday , April 16 2024
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Austerity, class warfare and weak labor markets

Summary:
Labor market still weak. New BLS report says that: "total nonfarm payroll employment increased by 142,000 in September, and the unemployment rate was unchanged at 5.1 percent." Also: "average hourly earnings of private-sector production and nonsupervisory employees were unchanged" and revisions meant that "employment gains in July and August combined were 59,000 less than previously reported." Not enough job creation, labor participation falling, and wages stagnant. Secretary of Labor said, correctly, that an infrastructure bill would be needed to get us out of the slow recovery. That used to be a bipartisan policy. Nobody was against fixing roads and bridges.But the chances for expansionary fiscal policy are nil. The US has adopted, basically since 2011, a contractionary stance. This basically results from the politics of hostage taking in Congress, and while we narrowly avoided a government shutdown this week, it is very likely that the budget and the debt ceiling limit would lead to one before the end of the year. Class warfare, and attack on labor, is at the end of the day the basis for this irrational fiscal policy, as I discussed a couple years back after another shutdown was in the news.PS: I'll be discussing some of these issues later today (4pm Eastern time) at the Rick Smith Show.

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Labor market still weak. New BLS report says that: "total nonfarm payroll employment increased by 142,000 in September, and the unemployment rate was unchanged at 5.1 percent." Also: "average hourly earnings of private-sector production and nonsupervisory employees were unchanged" and revisions meant that "employment gains in July and August combined were 59,000 less than previously reported." Not enough job creation, labor participation falling, and wages stagnant. Secretary of Labor said, correctly, that an infrastructure bill would be needed to get us out of the slow recovery. That used to be a bipartisan policy. Nobody was against fixing roads and bridges.

But the chances for expansionary fiscal policy are nil. The US has adopted, basically since 2011, a contractionary stance. This basically results from the politics of hostage taking in Congress, and while we narrowly avoided a government shutdown this week, it is very likely that the budget and the debt ceiling limit would lead to one before the end of the year. Class warfare, and attack on labor, is at the end of the day the basis for this irrational fiscal policy, as I discussed a couple years back after another shutdown was in the news.

PS: I'll be discussing some of these issues later today (4pm Eastern time) at the Rick Smith Show.

Matias Vernengo
Econ Prof at @BucknellU Co-editor of ROKE & Co-Editor in Chief of the New Palgrave Dictionary of Economics

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