Bill Mitchell — US labour market – floundering now despite modest gains

On October 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2020 – which shows that while employment continued to grow, the rebound has moderated significantly. Further, the unemployment rate fell by 0.5 points to 7.9 per cent but only because the participation rate fell by 0.3 points, which saw less workers in the labour force. If the participation rate had not fallen, then there would have been only a marginal improvement in the unemployment situation. The sources of that participation decline are not disclosed. The problem facing the US is that the lack of economic support from the Federal government means that the huge pool of unemployment will take years to reduce and the damage will accumulate. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. I do not see appropriate policy responses in place at present. From abroad, it looks like the US government is stepping back when it should be engaging in supporting all incomes and introducing large-scale job creation programs....

And this has the knock-on effect of debt deflation as non-performing loans increase owing to inability to service out of income. Those in the lower deciles have little or no savings on which to draw. As Michael Hudson has been pointing out tirelessly as the serious issue.

BTW, this is not because the deficit is too small. The deficit is the largest ever. Looking to the deficit is the wrong way to look. The right way is to look at total spending in terms of resource employment and price stability. Presently, there are many unused or underused resources and the pressing problem is not inflation but deflation, threatening debt deflation.

Total spending is not well-targeted, as shown by 1) increasing inequality of income and wealth (distribution) and 2) financial and economic stress among the lower 80% of the population (middle and lower classes).

The size of the deficit is immaterial. According to MMT, the issue is employment of available resources. The amount of spending and the size of the deficit should be determined by economic and financial considerations, that is, degree of employment of available of resources on one hand, and price stability on the other.

Bill Mitchell – billy blog
US labour market – floundering now despite modest gains
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

See also

Against the Current
The Increasingly Impossible Middle Class
David Roediger | Foundation Professor of American Studies at University of Kansas