Bubble Recovery

In order for the economy to rebound, some sector of the economy will have to begin growing in a meaningful way which will ignite growth across other sectors. We have seen supposed “jobless recoveries” from the last two recessions. Both of the last two recessions were not that severe and the recoveries that followed them had a lot more to do with public and private debt accrual and high level manipulation of the monetary policy. The public debt accrual is continuing at a record pace as I have discussed before, and monetary manipulation is at its highest levels ever – I am speaking about all of the different programs being run through the Federal Reserve and the Department of Treasury. But these two components alone can’t spur a recovery. In order for the economy to return to growth, credit-backed consumption has to return and then surpass pre-recession levels. We have all decided that is not a good idea and Americans have started saving money instead of going deeper into debt. Even the banks that previously fulfilled our every credit-related desire are having second thoughts about the economic soundness of some of their lending activities. So now what? Well, as I said, some sector of the economy has to start growing and part of that growth will mean that they will start employing more people. Herein lies that problem.

The graph above is from this article at the New York Times which shows private sector employment growth has been on the decline for the past eight years. This is not good news considering the US population is growing at a rate of 0.975% annually (notably, this figure does not include illegal immigration, but the employment growth data does). Put these two statistics together and the news goes from not good to downright bad. It means that more people are looking for work while fewer jobs are being created.

Since the decline in private sector employment growth did not start as a result of the current recession, there is no reason to assume a significant uptick after the recession subsides. In fact, the shrinking growth rate is following a general downward trend with a few small upticks that started as far back as about 1986.

Before I get into ramifications from this information, I want to reference a few other pieces of information from the Times article mentioned above.

In the above table of information you can see that all non-farm, private sector employment categories shrunk over the last ten years except for professional and business services, education, food services and health care. I would say that the only truly private sector field out of all of them would be food services. One could make a case for the private nature of the professional and business services category as well, although I don’t know if the data backing up this information differentiates between governmental and non-governmental servicing. As for education and health care, I do not consider these to be true parts of the private sector at all since billions of government and/or private debt go into propping up these portions of the economy. This makes looking at the above information all the more dismal. Without the piles of government money being borrowed and the bundles of money people are borrowing to continue their education, these two sectors would likely be in contraction as well. I have said before that health care and education are the two sacred bubbles left in the economy and they will be the last to pop because both are so politically-charged and are also both something that Americans have come to expect.

What we are seeing in the other sectors is the result of globalization that I have referred to in earlier posts. We are not making as much as we have in the past for sale to the rest of the world. That means there are not as many dollars to spread around as there were before. And as we all know, particularly in lean times, the private sector is not exactly known for its generosity so the money that is left tends to pool at the top and lower-level jobs get cut. Now that the rest of the world has caught up, there isn’t much that we can do either. The people in charge know this and that is why all of the solutions coming from D.C. and NYC are new spins on what got us here in the first place. More government funding through borrowing will not cure any of the problems that ail our economy, but they sure are popular. And if you can’t fix anything, why not try to keep people as docile as possible for as long as possible…