Why We’re Falling Into a Double-Dip Recession

We’re falling into a double-dip recession.

The Labor Department reports this morning that the private sector added a measly 41,000 net new jobs in May. But at least 100,000 new jobs are needed every month just to keep up with population growth.

In other words, the labor market continues to deteriorate.

The average length of unemployment continues to rise – now up to 34.4 weeks (up from 33 weeks in April). That’s another record.

More Americans are too discouraged to look for a job than last year at this time (1.1 million in May,  an increase of 291,000 from a year earlier.)

Of the small number of jobs created by the private sector in May, many came from temporary help services.

Which is one reason why the median wage continues to drop.

Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don’t have the dough. They can’t any longer treat their homes as ATMs, as they did before the Great Recession.

Businesses won’t rehire if there’s not enough demand for their goods and services.

The only reason the economy isn’t in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can’t continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we’re in the dip.

Retail sales are already down.

So what’s the answer? In the short term, more stimulus – especially extended unemployment benefits and aid to state and local governments that are whacking schools and social services because they can’t run deficits.

But the deficit crazies in the Senate, who can’t seem to differentiate between short-term stimulus (necessary) and long-term debt (bad) last week shot it down.

In the longer term, we need a new New Deal that will bolster America’s floundering middle class. Expand the Earned Income Tax Credit and extend it up through the middle class. Finance that extension through higher marginal income taxes on the wealthy, who have never had it so good.

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About Robert Reich 547 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

Visit: Robert Reich

2 Comments on Why We’re Falling Into a Double-Dip Recession

  1. The standard model economy we've used since Vietnam, is broken and it can't be put back together. We need a leader who will recognize we need a new economy and stop putting band-aids on the rotting corpse of the dead economy that is stinking up this country.

    Green energy, that the administration talks so much about but does so little to help, is really the future and the answer to our present problems. Green energy technology can be built domestically and can replace imported petroleum causing a tremendous shift in our trade deficit, back to a surplus perhaps. Solar,Wind Power,Tidal Power and most of all new smaller cleaner nuclear reactors using liquid fluorine thorium designs – could rebuild our power grid, our independence and restore a sense of national pride and unity.

    The middle class could finally have decent paying jobs, and a clear path towards which fields of education would be best undertaken. This stasis must be broken, this oscillation between bad news and worse must be broken, we must endevor to struggle towards this common goal, or continue to fall into the darkness.

    We must have leadership from Washington, and legislation – real bipartisan legislation for Green Energy without all the BS about greenhouse gases and vested oil and coal interests. We must do what is best for the nation, not what is best for those already suffocating our economy.

    Carpe Diem.

  2. I think Mr. Riech is a bit premature to declare a double dip, but the lack of job growth, and more importantly the rising number of discouraged and uncounted unemployed is troubling. Having been laid off 3 times in the last 24 months I am a living example of a person who keeps trying to get ahead only to be knocked down again by the failure of and reduction in force of business I am employed in. Its rather frustrating.

    I do agree we need competent leadership to get America out of its 2010 version of "Malaise". Economies are as much about confidence as they are about cold hard facts and people lose confidence when they see what is going on around them (war, job loss, environmental disaster) without anyone giving them hope.

    Regarless, people like me remain undaunted even in these tough times. I refuse to become a victim of news reports and fall into depression. In the end a positive attitude and confidence in the future, despite everything that is going on will put me and others far ahead when the economy can, and WILL recover.

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