Weak-kneed colossus

Were George Bush and John Kerry aware of the problems that await the next president, they would vie to throw the election, not win it. Job loss at home and failure abroad have already written the script that will sweep away the next administration.

Recession could return by the inauguration before the economy regains the jobs lost to the 2001 recession. Second-quarter 2004 economic growth was 20 percent less than expected. The consumer is showing weakness, and crude oil prices have reached record highs.

On Aug. 3 the Bureau of Economic Analysis reported that seasonally adjusted real per capita incomes declined in June below those reached in April. Total personal real spending declined 0.9 percent in June to that of last February.

The U.S. economy suffers not only from weak job growth but also from a loss of better-paying jobs. According to the Bureau of Labor Statistics, only 65 percent of the 5.3 million workers laid off from long-term jobs during the first three years of President Bush’s administration were re-employed by January 2004. That means about 1.9 million laid-off workers were unable to find new jobs during two years of economic recovery.

Of those who found new jobs, 57 percent — about 2 million workers — took jobs paying less than their previous positions. About 1.1 million of the workers who found new jobs experienced pay cuts of 20 percent or more.

This job loss may have occurred in the absence of a recession. The conventional definition of recession is two consecutive quarters of negative economic growth. However, on July 30 the BEA released the revised gross domestic product (GDP) data for 2001, and the recession, as conventionally measured, has disappeared. Did we experience not only a job loss recovery, but also a job loss nonrecession?

There was no recession in the second quarter of this year, but BLS data show 131,000 fewer American computer software engineers employed in the second quarter than in the first quarter of 2004 — a decline of 15 percent in three months. Employment of computer scientists and systems analysts declined 51,000 in the second quarter. Employment of computer programmers fell 16,000.

Despite the horrendous job loss, the unemployment rates for software engineers, computer scientists and programmers fell, which suggests technical professionals are discouraged and have stopped searching for jobs in their occupations.

The decline in high-tech professions in the U.S. also is reflected in the collapse in computer engineering enrollments in America’s premier engineering schools. Over the past several years, the Massachusetts Institute of Technology, Georgia Tech, and University of California-Berkeley have experienced computer engineering enrollment declines of 43 percent.

More unprecedented bad news comes from the Internal Revenue Service. For the first time ever, the real incomes of Americans shrank for two consecutive years. In 2002, Americans reported 9.2 percent less income than in 2000.

Consumers have kept the economy alive by spending their home equity. The low interest rates allow homeowners to carry larger mortgages for lower monthly payments. Drawing down equity to fuel consumption has caused a decline in net worth and a rise in debt.

What will provide the next leg of the recovery? Normally, a recovery is driven by the pickup in employment and rise in consumer incomes. Increased consumer spending, in turn, encourages business investment.

This normal cycle has broken down in the current recovery, and the breakdown might be long-lasting. U.S. firms have regained competitiveness by moving production and jobs offshore. Increasingly, U.S. multinationals serve their markets at home and abroad from China. More demand for their products means more jobs and investment in China.

Economists, policymakers, and chief executive officers of multinational corporations don’t care that outsourcing disconnects domestic sales from domestic production and employment. The Bush tax cut and low interest rate mortgage refinancing have been a boon for Asian economies.

Globalism has hijacked the American consumer and uses him to drive the Chinese economy. This will take a second bite out of the American worker through higher prices.

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