With the US Trapped in Depression, This Really Is Starting to Feel Like 1932

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The US workforce
shrank by 652,000 in June, one of the sharpest contractions ever.
The rate of hourly earnings fell 0.1pc. Wages are flirting with
deflation.

"The economy
is still in the gravitational pull of the Great Recession,"
said Robert Reich, former US labour secretary. "All the booster
rockets for getting us beyond it are failing."

"Home
sales are down. Retail sales are down. Factory orders in May suffered
their biggest tumble since March of last year. So what are we doing
about it? Less than nothing," he said.

California
is tightening faster than Greece. State workers have seen a 14pc
fall in earnings this year due to forced furloughs. Governor Arnold
Schwarzenegger is cutting pay for 200,000 state workers to the minimum
wage of $7.25 an hour to cover his $19bn (£15bn) deficit.

Can Illinois
be far behind? The state has a deficit of $12bn and is $5bn in arrears
to schools, nursing homes, child care centres, and prisons. "It
is getting worse every single day," said state comptroller
Daniel Hynes. "We are not paying bills for absolutely essential
services. That is obscene."

Roughly a million
Americans have dropped out of the jobs market altogether over the
past two months. That is the only reason why the headline unemployment
rate is not exploding to a post-war high.

Let us be honest.
The US is still trapped in depression a full 18 months into zero
interest rates, quantitative easing (QE), and fiscal stimulus that
has pushed the budget deficit above 10pc of GDP.

The share of
the US working-age population with jobs in June actually fell from
58.7pc to 58.5pc. This is the real stress indicator. The ratio was
63pc three years ago. Eight million jobs have been lost.

The average
time needed to find a job has risen to a record 35.2 weeks. Nothing
like this has been seen before in the post-war era. Jeff Weninger,
of Harris Private Bank, said this compares with a peak of 21.2 weeks
in the Volcker recession of the early 1980s.

"Legions
of individuals have been left with stale skills, and little prospect
of finding meaningful work, and benefits that are being exhausted.
By our math the crop of people who are unemployed but not receiving
a check amounts to 9.2m."

Republicans
on Capitol Hill are filibustering a bill to extend the dole for
up to 1.2m jobless facing an imminent cut-off. Dean Heller from
Vermont called them "hobos". This really is starting to
feel like 1932.

Read
the rest of the article

July
6, 2010

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