As Ma Parker would know, the word is “fragile.” We’re talking about the economy, and two bits of news from the past 24 hours.
First, the “flash crash” on Wall Street yesterday afternoon. That’s when the Dow Jones Industrial Average, already down about 400 points for the day, shed another 600 points in just seven minutes, before regaining that ground in about 20 minutes (the Dow and other major stock indices still closed down sharply).
We now know that a significant chunk of the losses are probably attributable to trading glitches and the automated shutdowns used by some trading firms; we’ll learn more in the days to come.
At the time, however, pundits’ fingers were pointed straight to Greece, where fears of a public debt default have forced the government to slash spending and raise taxes, in turn provoking street protests that have led to three deaths so far. Investors are worried that Greece’s problems could spread elsewhere in Europe and, ultimately, to the U.S. and elsewhere.
What’s noteworthy here isn’t that the blame appears to have been misplaced — even though, let’s not forget, many of the early losses yesterday, which are now bleeding into today’s trading, probably were attributable to Greece’s problems. It’s that it seemed plausible on Thursday afternoon that a rocks-and-tear-gas exchange between protesters and police in faraway Athens could turn an already terrible day for the Dow into a 1,000-point catastrophe in mere minutes.
People are scared. They are grateful for bits of good news but seem to expect the bottom to fall out again at any moment. It’s that word, fragile.
That’s why the cheerful news that the private sector added 231,000 jobs in April, the best month in more than four years, is being received so cautiously.
It doesn’t take much work to see the fragility in the jobs numbers, and I’m not talking about the bump in the unemployment rate up to 9.9 percent from 9.7 percent in March. It is probably correct to chalk up that bump to an increase in people actively looking for work, which may reflect optimism on their part that jobs can be found. If so, that part is still good news.
I’m referring instead to the broader gauge of unemployment, which also tracks those who have given up job-hunting or who have settled for less or lower-paying work than they’d like to have. That “labor under-utilization” figure already included those workers who became less discouraged and have now resumed their job searches. And yet this figure, too, rose last month by 0.2 percentage points, to 17.1 percent. As Phil Izzo, an economics writer for The Wall Street Journal, writes:
Though the [labor under-utilization] rate is still 0.3 percentage point below its high of 17.4% in October, its continuing divergence from the official number [of 9.9 percent]…indicates the job market has a long way to go before growth in the economy translates into relief for workers.
A [labor under-utilization] figure that converges toward the official rate could indicate improving confidence in the labor market and the overall economy. This month pushes convergence even further away.
This stagnation is, in part, a continuing vote of no-confidence in Washington’s pursuit of policies that add to, rather than subtract from, this lingering fragility. When markets have the sovereign-debt jitters, it doesn’t help to ramp up our borrowing from “too high” to “way too high.” When businesses are already unsure about their future prospects, it doesn’t help to add to the web of red tape they must sort through and comply with — such as this fun tax-reporting surprise tucked into ObamaCare. The cost of which, it emerges anew seemingly every day, is only getting higher and higher as we “find out what’s in the bill.”
Another stimulus, whether “Cash for Caulkers” or something larger, isn’t the answer. Employers will move forward when the president and Congress move out of their way.