Job growth is sputtering. So why aren’t the captains of American industry and finance — the nation’s top CEOs, the titans of Wall Street, the corporate movers and shakers — demanding that more be done to revive the economy? They have the political clout to make it happen.
It can’t be they don’t know that job growth is sputtering. The data are indisputable.
July’s job growth of 162,000 jobs was the weakest in four months. The average workweek was the shortest in six months. The Bureau of Labor Statistics has also lowered its estimates of hiring during May and June.
They can’t really believe further spending cuts will help. They can see the devastating effects of austerity economics on Europe. They know that the studies relied on by deficit hawks to justify more spending cuts have been debunked.
Not even Republicans are any longer trying to make the case for austerity.
So why isn’t corporate America demanding more dramatic measures to boost job growth? I can come up with only one rational explanation.
They don’t really mind high unemployment. In fact, they rather like it.
That may seem like a harsh conclusion, but consider the realities.
For one thing, high unemployment is keeping wages down. Workers who are worried about losing their jobs settle for whatever they can get — which is why hourly earnings keep dropping. The median wage of American workers is now 4 percent lower than it was at the start of the recovery.
Low wages, in turn, are boosting corporate profits. Corporations are doing well not because sales are up but because costs are down.
High unemployment is also fueling Wall Street’s extraordinary bull market. That’s because the Fed is committed to buying long-term bonds as long as unemployment remains high. This keeps bond yields low and pushes investors into equities.
The bull market in equities is boosting executive pay, which is tied to stock-market gains through stock options and bonuses. And it’s making Wall Street traders richer than they were before the Street’s near-meltdown five years ago.
Finally, high unemployment keeps most Americans economically fearful and financially insecure. Why would the captains of American industry and finance want this? Because people who are losing ground are more likely to believe that taxes should be cut on corporations and wealthy “job creators.”
But wait. Over the longer term, high unemployment can’t possibly be good for the captains of American industry and finance.
The real job creators are consumers, and if average people don’t have jobs or good wages, this economy can’t have a vigorous recovery. As growth slows, it’s only a matter of time before profits take a beating and stock prices plummet.
Over the long term, the corporate and Wall Street elites of America would do better with a smaller share of a rapidly growing economy than their current big share of an economy that’s hardly moving.
If they took the long-term view, they’d support higher taxes on themselves and their corporations to finance public investments in roads, bridges, public transit, better schools, and affordable higher education and health care — all of which will generate more and better jobs, and lead to faster growth.
But the captains of American industry and finance don’t take the long-term view. Their time horizons are myopically focused on tomorrow’s stock price and next quarter’s profits. That’s how they’ve made their money.
And that’s the problem — because the rest of America is languishing in a long term that’s looking ever bleaker.