Another Feeble Jobs Report -- And What's the Answer in Washington? More Austerity!

The press strained to find some good news in the government's April employment report. Superficially, things appeared a little better. The official unemployment rate dropped to 7.5 percent, and the number of long-term unemployed people declined by about 258,000. The government revised upwards the number of new jobs created, to 138,000 in March, plus 165,000 in April.

The stock market loved the news: Just enough job growth to keep the economy officially out of recession. But a sufficiently sluggish economy that the Federal Reserve will keep interest rates low, and workers will have little bargaining power.

Take a deeper look at the figures behind the April report and consider the coming impact of budget cuts, and the picture is still bleak for the vast majority of Americans. The job growth is not sufficient to materially improve the condition of most working (and out-of-work) Americans.

Wages are still basically flat. Since the financial collapse of 2008, 9.5 million Americans have simply left the workforce. And if you are not in the measured workforce, you don't count in the unemployment statistics.

As recently as 2000, just under 65 percent of Americans were in the workforce--employed or actively looking for a job. In the deep recession of 2008-2009, the percentage plummeted to less than 59 percent. And there it has sat for four years.

Despite 38 straight months of job growth, 2.6 million fewer people were employed in April 2013 than in December 2007 when the recession officially began. According to the Labor Department, 22 million people are unemployed or under-employed in part time jobs looking for fulltime work.

So what is the government doing to improve things? Why, cutting public spending of course. Most economists think these fiscal headwinds will snuff out the prospect of faster growth for the remainder of 2013--and for a decade if the Republicans and President Obama strike their long sought "grand bargain" of tax hikes and deeper spending cuts.

Why are they doing this? For fear that the current and projected levels of public debt will somehow risk future inflation and depress business confidence (which is actually depressed right now because not enough households have enough spending money in their pockets.)

Things are so grim that the Federal Reserve's policy-setting Open Market Committee, nobody's idea of a left-wing shop, felt the need to put out a statement Friday after the jobs numbers came out warning bluntly that "fiscal policy is restraining economic growth" and suggesting that inflation, if anything, is too low. The Fed vowed to keep interest rates extremely low, and suggested that the executive and legislative branches should take their feet off the brake. It's quite a situation when the Federal Reserve is the most fiscally left-wing outfit in town.

While the Administration and the Republicans and far too much of the commentariat are obsessed with public debt, private debts are killing the recovery. Some 22 percent of mortgages are still under water, and student debt has surpassed a trillion dollars.

My just-published book, Debtors Prison, addresses what I call "the double standards of debt." Banks can unload their toxic securities onto the Fed. Corporations can use the bankruptcy code's Chapter 11 to write off old debts (including to their pensioners) and get a "fresh start." But college borrowers stay indentured forever, as do underwater homeowners unless they want to lose the house.

The upside-down policy, of cutting public spending, giving debt relief to banks and corporations, while showing no mercy to students and homeowners, keeps the whole economy in debtors' prison. Until these policies change, we can look forward to a decade of high unemployment and an underperforming economy.

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