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Sheldon Filger

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U.S. Jobs Report For June Shows Continued Economic Stagnation; This Is Not The "New Deal"

Posted: 07/06/2012 2:37 pm

The latest report from the U.S. Bureau of Labor Statistic indicates that only 80,000 jobs were created in the United States in June. One must take into account that the BLS figures are abstractions and not exact, and usually reveal only the most optimistic spin of the employment data. The BLS also reports that the American unemployment rate remains unchanged at 8.2 percent.

Since the U.S., with a population in excess of 300 million, must create between 150,000 and 200,000 jobs a month just to keep even with population growth, the only reason a tepid jobs creation number of 80,000 would also reveal no increase in the unemployment rate is that many Americans formerly classified as unemployed were reported by the BLS as having "left" the workforce in June, so they are no longer counted as unemployed. Such mathematical gymnastics may produce a slightly better spin on the unemployment picture in the United States, but they obviously do not resolve America's profound economic problems.

It must be pointed out that even the exceedingly poor job creation figures of the past several months have been purchased at a very high opportunity cost. Since the global economic and financial crisis of 2008, the U.S. has been running annual structural mega-deficits of more than a trillion dollars annually. In fiscal year 2012, the U.S. federal budget projects expenditures of $3.8 trillion dollars and revenue of only $2.5 trillion. That means one third of U.S. federal government expenditures are derived from borrowed money. If such a massive fling of red ink can produce, at best, economic stall speed, one shudders to think what will befall the world's largest economy once the spigot of cheap borrowed money is shut off by creditors who have lost their patience with America's hopelessly gridlocked political system.

What went wrong with the Obama administration's stimulus program? In the decades to come, scholars will wax eloquent in their analyses and academic explanations. However, one need only look to the last great American recession, the Great Depression of the 1930s, to note a major difference. The priority of the Obama administration was saving Wall Street, meaning the banks, including investment banks, at all costs, viewing the financial sector as the center of gravity of the American economy. In the case of the administration of Franklin Roosevelt in the 1930s, its policies, known as the New Deal, focused on the industrial sector and job creation as the nation's economic center, and viewed the financial sector in a punitive manner, requiring investigation and strict regulation and reform. Arguments over the effectiveness of the New Deal continue to this day, however one fact cannot be denied. On the day that Franklin Roosevelt died in office, America was unquestionably the leading industrial and manufacturing nation on earth, and the role of financialization was below 2 percent of GDP. How different things are today.

 

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