U.S. Economy: Running Backwards

by: Gregor Macdonald

Oil is at 90 dollars a barrel. The governments of Europe, Japan, and the United States are saturated with debt. House prices in the US are falling again, and there’s no job growth in America. Put it all together, and for some reason, many are still imagining that we’re in an economic recovery.

Friday’s horrid jobs report contained some shock value in the sense that it missed expectations. But the novelty of a 39K print misses the larger point that, for a large population like the US, even a print of 100K or 125K would still be very bad news. The US needs to create at least 150K jobs per month just to soak up population growth. Meanwhile, we now have a tranche of 15 million out of work people. As you can see in the chart below (click to enlarge), total employment falling back below 139 million to 138.88 million does nothing but maintain levels last seen in the early part of the previous decade. This is a huge hole. And now, three years after the start of the economic crisis, we can say resolutely that America has a structural unemployment problem. As other countries have discovered, that’s a hard problem to solve. | see: United States Employment in Millions 2000-2010.

There is in fact a very small recovery taking place in the US economy that centers mostly on exports, and can be found in the shipping routes of the country, whether that’s the St. Lawrence Seaway or our myriad rail lines that take goods to seaports. I wrote about this two weeks ago in StockTwits Macro Weekly, in a piece called: The Slows. Essentially, a handful of Americans are going back to work in our surging export industries, but, they are doing so at much lower pay. In addition, while the US is indeed a large exporter of goods–our overall exports are only a small part of the economy that we were building the last 25 years. Yes, the one based instead on financialization, credit and consumption.

A large system like the US economy, with its rolling claims on the future in the form of debt and entitlements, needs to be moving forward at a minimum rate of speed. Otherwise, the system is essentially running backwards. The current level of job “growth”–which should really be referred to as “churn”–does not meet the minimum, required threshold that the US system demands. Accordingly, tax revenues to the states and the federal government, and the need for food stamps and unemployment checks, are all set to continue moving in the wrong direction. Now add 90 dollar oil to the mixture. If sustained, the price of oil–our old nemesis–is very likely to force another crisis in OECD economies come 2011.