Mounting fears of a ‘double-dip’ recession

What happened

A spate of downbeat economic reports in recent days revealed that the slow-moving recovery is sputtering, heightening fears of a second, “double-dip” recession. The unemployment rate fell slightly in June, to 9.5 percent, but only because 652,000 discouraged job-seekers dropped out of the labor force. Private employers added only 83,000 jobs, a gain that was more than offset by the layoffs of 225,000 federal census workers. The economy needs to add 150,000 jobs a month simply to keep up with population growth, and would need to add 250,000 a month for three years to recover the jobs lost in the recession. The monthly manufacturing survey by the Institute of Supply Management, meanwhile, revealed a slowdown in factory orders, while new-home sales plunged 33 percent, as the federal government’s $8,000 home-buyer’s tax credit expired. Car sales fell 10.8 percent from May to June. “In general, the economy is downshifting,” said Northern Trust economist Paul Kasriel, “maybe to stall speed, or just above stall.”

President Obama said the employment report showed that the recovery is “headed in the right direction,” but not “fast enough for a lot of Americans.” But economists warned that hiring may have already reached a near-term peak, with employers reluctant to add jobs in a stagnant economy marked by restrained consumer spending. Consumer spending could fall further as benefits for unemployed workers expire. Congress declined to extend unemployment benefits before leaving for its July Fourth recess.

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What the editorials said

The latest jobless numbers send an unmistakable message, said The New York Times. The recovery is “running out of oxygen” and will suffocate without a rapid infusion of new jobs. But Congress refuses to stimulate the economy by restoring unemployment benefits and sending aid to states, which are laying off tens of thousands of workers as their budgets collapse. “GOP posturing” on the deficit is what’s blocking the additional help, said the San Jose Mercury News. “Economists are almost universally urging stimulus spending over deficit reduction,” but Republicans have an interest in “preventing Democrats from claiming any legislative accomplishments” going into November’s congressional elections. That “cynical” ploy might be good for the GOP, but “for the national economy, it’s a disaster.”

Washington has done quite enough already, thank you, said The Wall Street Journal. Employers have stopped hiring because they can clearly see “the destructive impact that higher taxes, trade restrictions, and more regulation” have already had on business activity. Yet Obama and the congressional Democrats claim that even more government action will finally jump-start the jobs machine. Please, quit while you’re behind.

What the columnists said

Unfortunately, the damage has already been done, said Diana Furchtgott-Roth in The Washington Examiner. The Obama administration’s stimulus efforts should finally put to rest the perverse idea that “costly interventionism” by the government can revive hiring. Take the administration’s legislative showpiece, the health-care law. When it takes full effect, employers with 50 or more workers will have to provide them with health insurance or pay a $2,000-per-worker penalty. “This discourages hiring.” The heavy hand of Washington is what’s holding back the recovery.

You’ve got that exactly backward, said Robert Reich in TalkingPointsMemo.com. Hiring and other economic activity has stalled because the government is doing “less than nothing” on jobs. The tax increases, public-employee layoffs, and service cutbacks that states are enacting amount to an “anti-stimulus program” that dwarfs the size of the federal government’s stimulus. A crash program to rebuild infrastructure and develop alternative energies could reverse the slide, but the administration, inexplicably, seems content to be “slouching toward a tepid recovery.”

It’s a puzzlement, said Daniel Gross in Slate.com. Few policymakers “seem to care much about high unemployment.” Congress skedaddled off on holiday without extending jobless benefits, and the day before the unemployment report was published, Obama gave a major speech on … immigration. It’s as if the administration had run out of energy after getting health-care reform passed. Instead of a sense of urgency, Washington’s only response during this summer of misery “seems to be a collective throwing-up of hands.”