It’s a long and winding road for the jobless – at least in the US. The latest monthly employment figures came out today (Friday 6 August) and it was not good news for those without a job. The number of available jobs slumped by 131,000 in July.
Much of this loss was due to the end of temporary jobs provided to do with the ten-year population census that is now over. But even so, federal and government full-time jobs fell by nearly 50,000, the first time employment in the public sector has fallen for some time. The spending cuts in public services like schools, transport and cleaning, taking place across the nation as state government try to balance their books, is beginning to bite.
The private sector has not stepped up to the plate to replace lost jobs in the public sector. Private sector jobs employment rose 71,000, much less than expected and much less than necessary to begin to reduce the unemployment rate of 9.5%. To do that, over 200,000 new jobs must be created every month.
About 14.6 million Americans remain unemployed. And of these, 45.5% , or 6.8 million, have been out of work for 27 weeks or more. The ranks of these long-term unemployed remain at a post-Depression record. There are now 7.9 million more Americans out of work than when the recession began in December 2007. And roughly 15 million more are underemployed or have dropped out of the labor force — and thus the statistical calculations.
What’s worse is how slow the recovery in jobs has been after the Great Recession. Ten months after the end of the 1981 recession, 87% of the 2.8 million jobs lost in that slump had been replaced. So far in this recovery, ten months on, only 4.8% of the 8 million jobs lost have been replaced.
The recovery in corporate profits is by no means so weak. As earnings results have flooded in over the past few weeks, the average annual rise in profits has been 35% and big businesses have recovered almost 90% of what they lost during the recession. It is the reserve army of labour, as Marx called the unemployed, who are paying for this profit boost as capitalist firms cut back on the costs of production (labour and machinery) in order to raise the rate of profit, in the classic (Marxist) way out of a capitalist slump.
American corporations are beginning to increase fixed investment a little in order to raise production, but there is still a huge level of over-capacity in most industries. The utilisation of available machinery and labour in US industry remains near 50-year lows.
This will discourage corporations to take on more staff or increase investment. That means a slow recovery from the Great Recession.
Contrary to the consensus view up to now, there will be no V-shaped economic recovery. On the contrary, the consensus is switching to the opposite view that there could be a ‘double-dip’ i.e. a new slump. I stick to my view that US capitalism is likely to have a ‘square-root’ recovery. There has been a bounce back from the depths of the Great Recession, driven by government spending, cheap or zero-cost finance for the biggest companies, but above all by huge cuts in corporate costs by laying off labour and closing down capacity (liquidating bust firms or taking them over).
Corporate profitability has been driven up and so has the mass of profits. But the heavy weight of ‘excess capital’ still in the economy will keep investment growth and the creation of new jobs weak. So US economic growth will be well below average and flatlining. US capitalism will need another slump down the road to clear away this ‘excess capacity’.