UMass Amherst’s Richard Wolff discusses why labor force participation is the lowest since 1977 and what’s really needed to stimulate the economy
JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to the Real News Network. I’m Jessica Desvarieux in Baltimore. The Department of Labor released its jobs report for September, and it’s way behind expectations. The U.S. economy created about 140,000 jobs when economists expected a bit more than 200,000 new jobs. The share of the population in the workforce, which includes people who have jobs or who are looking for one fell to about 62 percent, the lowest level since 1977. Now joining us to give us the story behind the numbers is our guest Richard Wolff. Rick is a Professor of Economics Emeritus at the University of Massachusetts Amherst, and he’s currently a visiting professor at the New School University in New York. Thanks for joining us, Rick. RICHARD WOLFF: My pleasure, Jessica. Thank you for inviting me. DESVARIEUX: So Rick, this is the second month that we’ve seen job numbers be behind expectations. Why did we see job numbers go down and what does China have to do with all of this? WOLFF: Well, we’re seeing the numbers go down because the inevitable effect of severe economic troubles in Europe coupled with a slowdown of economic growth in China, it was only a matter of time before these two tsunamis hit the American economy. We’ve been celebrating that we’re not as bad off as them, but it’s a little bit childish. The crisis started here and hit them later. And now that they’re in trouble it’s reverberating back on us. And therefore, our numbers across the board are looking grimmer and grimmer in terms of the economic prospects for our people. And you’re quite right that the labor force participation is the real important number here, together with real wages. And both of those are in very bad shape. DESVARIEUX: All right. And is this bad news for everyone, these job numbers? Are there sections of the economy still doing quite well? And are people pretty much feeling the pain, or are people feeling the pain throughout the global economy? WOLFF: I think people are feeling the pain throughout the global economy because this is a global effect. Europe and China and the United States are in many ways the three poles of the world economy. Everybody else caught up in the relations among them. So everybody’s hurting. But in a capitalist economic system of the sort we have, when there is hurt those at the top are the ones best positioned, and have the resources to push the pain away from themselves and push it on to those just below them. And so it, if you like, trickles down. And the folks at the bottom, the temporary workers, the part-timers, the unskilled, those in the least capacity to protect themselves are the ones upon whom the ax eventually falls. And they don’t have anybody else to pass it down to. So everybody’s hurting, but those who should hurt the least hurt the most, and those who should hurt the most hurt the least. It’s the way our system works. DESVARIEUX: Yeah, Rick. And a lot of people are also looking at how these job numbers are going to affect what the federal reserve does in terms of interest rates. That affects everything from how much you pay for a mortgage or a car. Do you see these numbers making a clear case for the Fed not to end its near-zero interest rate policy at its scheduled meeting later this month? WOLFF: I think so. I think that the very thing that prevented them from raising interest rates last month when they were scheduled and had said likely they would do so was their concern, that of Janet Yellen and all the others, that the American economy, especially looking at what’s going on in the world, is in way too scary a poor shape to give it the hurt, if you like, of a higher interest rate. Which as you point out makes it more expensive to buy a car, to take out a mortgage for your home, to pay for your child’s education, which is now a matter of borrowing money in this country. And so it is highly likely that these kinds of numbers are going to make them very worried that if they take the American economy off the life support of low interest rates and endless increases in the money supply, that there will be a downturn that will be severe again, and they don’t want to take that chance and they don’t want that responsibility. DESVARIEUX: All right, Rick. Let’s turn the corner and talk about solutions. Give us some clear policies or initiatives that you think would actually stimulate the economy. WOLFF: Well, we’ve kind of run out of the usual ones when it comes to monetary policy. Normally increasing the money supply and lowering interest rates is a way to get people to spend more money. We’ve been doing that pretty much nonstop since 2008, and yet here we are with these awful numbers. There’s not much more you can do in that area. Well, what else is there. The government could stimulate more by running bigger deficits. That’s not going to happen, because the Republicans and the conservative Democrats have basically bought into the idea that the federal government ought to have a balanced budget no matter what the economic damage is of having the government not be the spender of last resort, which we now need because no one else is able to buy anything that would keep this economy going. So my fear is we have so long believed that we could make little adjustments, monetary policy here, tax increase or government spending there, that we are unable as a nation to look at the bigger picture. To be honest enough to say, the little policy adjustments that we’ve been talking about no longer cut the mustard. They no longer are adequate to the level of problem we have, so that the honest and realistic thing is to say, look, we need much more fundamental change. And no matter how uncomfortable that makes people who are committed to the status quo, if you don’t do that you are fiddling around with policies that are no longer adequate to the level of economic problem we have. DESVARIEUX: All right. Rick Wolff, joining us from Massachusetts. Thank you so much for being with us. WOLFF: My pleasure, and thank you for inviting me. DESVARIEUX: And thank you for joining us on the Real News Network.