The Jobs Numbers and the Deficit

01/06/2013 10:37 pm ET | Updated Mar 08, 2013

The private sector created 155,000 jobs in December, almost exactly the average for the 11 previous months of 2012 and for all of 2011. Once again, it is a record far too weak to produce real progress towards either an adequate recovery or decent growth in wages and salaries. At this rate of job creation, according to the Economic Policy Institute, it will take another decade to get back to the employment rate of early 2008.

According to the Labor Department, there were 7.5 million net jobs lost in the recession, and a gain of only 3.5 million net jobs so far in the recovery. We have 4 million fewer jobs now than five years ago, and a much larger labor force.

Consider the connection between these tepid job figures and the debate that still occupies center-stage in Washington -- deficit reduction. Supposedly, businesses are not creating enough jobs because business leaders are anxious about the Federal debt.

For months, we have been hearing that businesses have been putting off making new investments or hiring new workers for fear that Congress would fail to cut the federal deficit. The austerity lobby helpfully put reporters in touch with businessmen who claimed that the uncertainty about the budget was dampening their willingness to expand, producing stories like this one in the New York Times last August. The Times contended:

A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months.

But this turned out to be just about total baloney. During the months when the Congress and the press kept everyone on the edge of their seats wondering about the dreaded fiscal cliff, business behavior went on as normal -- and a mediocre normal at that. The lousy rate of job creation hardly changed. Detroit enjoyed a good fourth quarter as very low-interest rates stimulated auto sales. Christmas sales were about what was predicted, as consumers turned to their credit cards.

To the extent that the economy has remained stuck in first gear, it has everything to do with high unemployment and lagging wages, and just about nothing to do with the fiscal cliff or worries about the debt ratio 20 years down the road.

The sluggish recovery has intensified a power shift from working people to corporations that has eroded the standard assumptions about the nature of employment. What the Labor Department calls "payroll employment" -- the basis for both its statistics and assumptions -- is becoming every more scarce.

A generation ago, the norm was a salaried job with a paycheck, regular hours and benefits, and the assumption that you'd keep the job and maybe get a promotion of you performed well. This is a vanishing dream for those under 30.

Supposedly, the new flexible workforce loves not being chained to a single job or a single career, or to regular hours. But the reality is that the new labor market of temp, part-time, and contract employees exists for the convenience of the boss, not the workers. These shifts have little to do with the "new," computer-mediated economy and everything to do with changes in relative power.

The higher the unemployment rate, the weaker the bargaining power of employees. And it's very hard to unionize workers at even the relatively benign employers of the new economy like, say, Starbucks or Whole Foods, because workers in these places hope they won't be there forever -- they're all really doing something else.

I recently encountered the term, "slasher" -- meaning not a psychopath with a knife but a worker juggling three or four jobs. As in, I'm a slasher: barista-slash-web designer-slash research assistant-slash nanny. This is the increasing face of the new labor market, and it will remain so until we get a decent recovery and more bargaining power for workers.

Which brings me back to the fiscal cliff and the deficit. Remember, employers were supposedly holding back investing and hiring for fear that the economy would go off the cliff, meaning that automatic tax increases and spending cuts would contract the federal budget by $607 billion in 2013 -- so severe a contraction that the Congressional Budget Office projected it would kick the economy back into recession.

But the same economic charlatans who were warning about the impact of these cuts want us to leap off a much bigger cliff--of four or five trillion dollars in budget cuts over a decade. Either severe fiscal contraction is bad for a fragile economy or it is good for a fragile economy, but both things can't be true.

Psychologists who treat dysfunctional families use the term "identified patient" to describe a family member who is scapegoated for the ills of the whole family system or who bears symptoms such as depression that are really a reflection of family dynamics as a whole.

In the depression of our economy, the Federal budget deficit is the "identified patient." But real patient is the failure of the economy to create enough jobs that pay a living wage. The deficit is the scapegoat. None of the economic quacks who contend that budget cutting will produce more private sector jobs can tell a convincing story of cause and effect, on how cutting deficits will yield more or better jobs. In a weak economy, the opposite is true -- as the austerity hawks inadvertently confessed in their own hysteria about the fiscal cliff.

In sum, the mediocre job numbers are likely to continue, and budget cutting will only weaken a feeble recovery. President Obama did well at keeping cuts in Social Security, Medicare and other special spending out of last week's budget deal. But now Republicans are intent on demanding deep cuts as their price for avoiding the "sequester" of automatic spending reductions.

If Republicans succeed in extracting cuts, the unemployment numbers will only get worse. Then they can blame that worsening on President Obama.

The president needs to use his leadership skills to make clear that this is not about this cut versus that cut. Budget cuts do not belong in this argument at all. Government should be investing more, not less, to compensate for the weakness of the private economy.