• Opinion

Robert B. Reich: The job stall

However one looks at last Friday's jobs report, it's a stunning reminder of how anemic the recovery has been -- and how perilously close America is to falling into another recession.

Not only has the unemployment rate risen for the first time in almost a year, to 8.2 percent, but, more ominously, May's payroll survey showed that employers created only 69,000 net new jobs. The Labor Department's Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months.


We're heading in the wrong direction. From December through February, the U.S. economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide. At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.

I'm afraid the American jobs recovery has stalled.

Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects, and they're slowing as well. All this takes a toll on U.S. exports.

But a bigger part of the problem is right here in the United States, and it's clearly on the demand side of the equation. Spending by American consumers constitutes 70 percent of economic activity in the U.S. Yet American consumers don't have the cash or the willingness to spend more.

That's because they're worried about keeping their jobs, while at the same time their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents -- an increase of 1.7 percent from this time last year -- but that's less than the rate of inflation. The average workweek slipped to 34.4 hours in May.

To make matters worse, the value of their homes -- their biggest assets by far -- continues to decline. Home values are, on average, a third below their peak in 2006. This obviously makes U.S. consumers feel even poorer.

Big U.S. companies are still sitting on a huge pile of cash. They won't invest it in new jobs because American consumers aren't buying enough to justify the risk and expense of doing so.

The paradox is that U.S. corporate profits are still healthy, largely because companies have found ways to keep payrolls down -- substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that's exactly the problem. Workers are consumers. In paring their payrolls, companies have also pared their customers.

The government isn't making up for the shortfall in consumer demand. Federal stimulus spending is over. In fact, the government has embarked on an anti-stimulus program. Republicans have started cutting the federal budget. Meanwhile, state and local governments continue to lay off large numbers. The government workforce dropped by 13,000 jobs in May. Instead of providing a needed boost, government cuts have become a considerable drag on the rest of the economy.

It's possible, of course, that the economy could turn around this year. Remember last year's midyear stall? By last fall, the economy had come back to life. But I wouldn't bet on a turnaround any time soon. The economic fundamentals aren't positive, here or abroad.

Not surprisingly, Republicans have had a field day with the May jobs report -- using it to argue that President Barack Obama's economic policies have failed and we need, instead, their brand of fiscal austerity combined with more tax cuts for the wealthy. That's precisely the reverse of what's needed.

Obama shouldn't let Republicans get away with it. He should call for a cut in the payroll tax that now takes more than 6 percent of every working person's wages. Exempting the first $20,000 of income from this tax for the remainder of 2012 and all of 2013 would immediately put money into Americans' pockets, much of which they'd spend.

And the president should renew his call for more federal spending to repair America's crumbling infrastructure. With all the foreign savings flowing into dollars these days, the U.S. can borrow at rock-bottom rates -- and use the money to put large numbers of Americans back to work rebuilding America.

Republicans won't support any of this, of course. They've barely cooperated since the beginning of Obama's presidency.


So when Republicans refuse to sign on, the president should blast them, explaining we'll get a real jobs recovery only when he has the votes to make it happen. Come Election Day, Americans can make sure he has those votes.

Robert B. Reich, Chancellor's Professor of Public Policy at the University of California and former U.S. Secretary of Labor, is the author of the newly released "Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it," a Knopf e-book original.