Monday May 10, 2021
| Last update: Monday at 11:27 AM

Bottom Falls Out of the Job Market

More than Half a Million Jobs Lost in November, Most since 1974
by Adam Price |
December 6, 2008
Read more articles in

San Jose, CA - On Friday, Dec. 5, the Department of Labor reported that 533,000 jobs were lost in November, the worst one-month decline since 1974. The job losses cut across the economy, with only health care showing any sizable increase in employment. In addition the report revised upward the job losses in September and October, showing that the economy has lost a total of almost 2 million jobs in 2008. The official unemployment rate increased two-tenths of one percent to 6.7%. This figure would have been much higher except for the fact that more than 400,000 people stopped looking for work and were not counted in the official unemployment report. A broader measure of unemployment that includes people working part-time but wanting full-time work, and those jobless who had given up looking for work, rose to 12.5%, or one out of every eight people in the labor force.

The first week of December was a virtual drumbeat of bad news on the economy from November. Measure of the manufacturing and service sectors by the Institute for Supply Management fell to record lows. Car sales tumbled for the second month in a row, dropping 30% from November 2007. The number of jobless workers collecting unemployment benefits rose to more than 4 million, the highest number since 1982. Retail store sales fell by the largest amount on record despite a not so bad ‘Black Friday’ after Thanksgiving.

Although everyone but President Bush already knew, the National Bureau for Economic Research announced on Dec. 1 that the economy was officially in a recession which began a year ago in December 2007. (For more information on how the start of a recession is decided, see my Fight Back! article from Feb. 3, 2008, Did the Recession Begin in December?). Following this announcement, President Bush for the first time used the word “recession” in one of his press conferences.

With the recession in its twelfth month, it is already the third longest since World War II, with only the 1974-1975 and 1981-1982 recessions lasting longer at 16 months each. The length and depth of the current recession raises the question, are we in another depression? The Great Depression of the 1930s actually included two recessions, one from 1929 to 1933, and another in 1937 to 1938. But the recoveries from these recessions were very weak, with unemployment not falling much below 10% until the war-driven recovery of the 1940s.

In the 1930s, as is the case today, the economy is being driven down by the deadly embrace of a recession and a financial crisis. A recession is a crisis of overproduction, where businesses cannot sell their products at a profit, leading to layoffs and even less buying, as most clearly seen in the auto industry today. A financial crisis is a crisis in the circulation of capital, where banks do not lend (U.S. banks are now sitting on more than $600 billion of cash, more than twice as much as just a month ago). The lack of credit forces even more business to fail and home buyers to default on the mortgages, increasing losses at the banks, who in turn lend even less.

Of course, as many point out, the economy today is not as bad as 1933 when the unemployment rate was close to 25% and the banking system ground to a halt. But how are we today as compared to 1930, a year into the depression? Up until the fall of 1930, more than a year after the recession began, the economy seemed to be in a normal economic downturn. It was not until the first of three waves of bank failures took place between October and December of 1930 that the economy started to collapse. While it is true that today there is a larger safety net from the Depression era New Deal (which include social security, unemployment insurance, welfare, etc.) and the 1960s Great Society (Medicare and Medicaid), the United States is also fighting two wars and is dependent on a continuing inflow of foreign capital to pay for a $700 billion trade deficit, unlike the 1930s.

So why doesn’t the government lend directly to the people and businesses instead of just shoveling more money (over $2 trillion so far) to banks that refuse to lend? The answer is that we don’t have a government of the people, we have a government for the big banks and billionaires. During the 1930s big business and big banks fought the government programs known as the New Deal tooth and nail. Today there is the same resistance to the government helping people directly by making mortgages, allowing bankruptcy judges to modify mortgages, or having a government jobs program. The problem is that the government is more dedicated to capitalism and the profit motive than to saving people’s homes or jobs. More and more, today’s economic crisis points out the need for socialism.