On Friday, the Bureau of Labor Statistics (BLS) reported that the U.S. economy created a net of only 18,000 new jobs in June. This was far lower than the 100,000 to 150,000 or more that mainstream economists had been predicting. Even worse, the May jobs report was adjusted sharply downwards.
Life Magazine, January 9, 1931
There was a lot more bad news. The unemployment rate rose to 9.2%. One-third of the unemployed have been unemployed for over a year. Almost half have been unemployed for over 6 months.
Although one month’s figures usually don’t mean anything, I get the impression is that this report is having a seminal effect on mainstream economists.
I was watching CNBC on Friday morning as the jobs report came out, and I saw several mainstream economists first make gleeful, optimistic predictions, and then go into a state of shock where they could barely say anything but gibberish.
These are the people who have been promising “a V-shaped recovery next quarter” every quarter for three years. For the last few months, I’ve been hearing that “we’re only in a soft patch,” and the huge V-shaped recovery would take off in the last half of the year.
Now what I heard them saying is that the recovery won’t occur until next year. I guess we’re going to have to listen to predictions of a V-shaped recovery in January for next six months.
Mainstream economists have gone through one of these transitions every 3-6 months for the past few years. Every time they have to change their projections, as they’ve had to now, they say, “Nothing like this ever happened before.” What they mean when they say that is “Nothing like this has happened since the end of World War II.” As we’ve been saying for years, what’s happening today is comparable only to the 1930s, the last period with the same generational configuration.
The same problem is happening in Europe, where the exponentially growing debt crisis in Greece, Ireland, Portugal and Iceland have caused officials to put forth one crazy proposal after another. The saying “kick the can down the road” is supposed to mean “buy some time until the V-shaped recovery kicks in, and the debt crisis takes care of itself.” This is what’s always happened since the end of World War II.
What they don’t understand is that nothing that’s happened since the end of WW II is applicable today. The generational configuration matches the 1930s, and that’s the only relevant comparison period to look at.
Revisiting the 1930s
When I was in school in the 1950s, my teachers all talked about how economists and experts in the 1930s kept predicting that conditions were about to improve, and they never did. I never understood how the experts could be so wrong, but now that the same thing is happening again, I can see what’s going on. It just proves that so-called “experts” are just as vulnerable to wishful thinking and ignoring the fundamentals as the dumbest love-struck teenager.
A year ago, in June, 2010, the White House believed that the economy was about to pick up, and Ron Sims, Deputy Secretary of Housing and Urban Development, posted the following, entitled A Summer of Recovery:
“With tens of thousands of projects funded and millions of Americans on the job today, it’s hard to believe that it’s only been 16 months since President Obama signed the American Recovery and Reinvestment Act. And with so many jobs saved and created already, you might think that the Recovery Act’s greatest impact is behind us.
But it’s not.
As the summer heats up, it is becoming clear that it could quite possibly be the most active season yet when it comes to recovering our economy. There are Recovery Act-funded projects breaking ground across the country that are creating quality jobs for Americans and economic growth for businesses, large and small.
This summer is sure to be a Summer of Economic Recovery.”
Boy, talk about sounding like a love-struck teenager!
People have accumulated long lists of dumb-sounding statements by 1930s experts, starting with President Herbert Hoover’s “Prosperity is just around the corner.”
Now, conservatives are beginning to accumulate long lists of dumb-sounding statements by President Obama. Here’s a cartoon from National Review Online:
President Obama timeline
Generational crisis era transitions
There’s a very interesting way of looking at this situation from the point of view of generational theory.
America has had two generational crisis wars since it’s founding — the Civil War and World War II.
When a country goes through a generational crisis war, in many ways it comes out of the war a new country, a different country, sometimes with an entirely new character.
When America came out of the civil war, America decided that freedom was the ultimate ideal — freedom for individuals and freedom for businesses in a laissez-fair economy.
By the 1930s, America was deciding that freedom, when carried to an extreme, was a mistake, especially for businesses. President Hoover was blamed for being unwilling to understand that businesses could not simply do anything they wanted, and he was blamed for giving businesses freedom in return for votes. The conclusion of the American people, as embodied in President Roosevelt’s New Deal, was that freedom had to be tempered with reasonable regulations and government intervention to control excesses and to protect poor people.
Now, in the 2000s, there appears to be a gathering American opinion that regulation and government intervention have gone too far. This new attitude is being expressed in such remarks as “Obama is anti-business” or “Obama is a socialist.” The Administrations heavy-handed regulatory framework, especially the health care law and various pro-union initiatives, are leading to accusations that Obama is harming the economy, and making it impossible for businesses to hire new people. Just as Hoover was accused of favoring businesses for their money and votes, Obama is being accused of favoring labor unions for their money and votes.
When looked at this way, it seems likely that America will have a different character after it’s gone through this crisis, and that character will conclude that government intervention has gone too far. It remains to be seen how the new character of America will be defined.