Doesn’t look good:
Official unemployment now stands at 6 percent; 8.8 million Americans are unemployed, an increase of 3 million since October 2000. The specter stalking the Fed is that of deflation, something that our central bank has not concerned itself with since the Great Depression. The Fed’s most recent report warns, in ever-cloudy Fedspeak, of an “unwelcome substantial fall in inflation.” No one is anticipating a 1930s-style collapse of prices, wages and employment, but the threat of prolonged stagnation, with all its quiet human disasters, is very real.
Several decades ago, French social commentator Alain Minc wrote evocatively of a “slow 1929,” in which the economy, bolstered by the safety nets put in place in response to the real 1929, does not crash; it sags. We seem to be in a slow 1929 right now: Wages decline slightly (by 1.5 percent over the past year for workers at the median income level), workweeks grow shorter (to 34 hours, the lowest level since the government started measuring workweeks in 1964), health-insurance premiums and co-payments grow more costly, and factories don’t run at full speed. (In fact, they’re running at the lowest level of capacity since 1983.) Growth creeps along (rising at a 1.6 percent annual rate in the first three months of 2003) but productivity grows faster (at nearly 2.5 percent). America can increase its output by 2.5 percent, therefore, without hiring more workers. To hire more workers, growth has to outpace productivity. It’s not.
As the article points out — Bush’s “monomaniac” obsession with tax cuts is likely to worsen the situation. In the NY Times, Robert Reich says not to go to graduate school…