Credit Conditions are Still a Headwind Against Economic Recovery

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.

I don’t even quite know what to make of this chart from Karl Smith, but here it is anyway for everyone to ponder. The red line represents employment by the government and by goods-producing sectors. Kablooey! The blue line represents employment by everyone else. Not bad!

Karl’s take is that this demonstrates that the economy is still highly sensitive to credit conditions:

We are largely talking about construction workers, metal and automotive workers, and school teachers. These workers are massively influenced by credit constraints. One cannot build a building without credit. One cannot buy a vehicle without credit and state and local governments have very little credit room by statute.

So what we need for job growth to really hit its stride is for construction to come back, cars to come back and school teachers to come back….Because these sectors respond so much to liquidity the job recovery is still fragile.

I’m not sure I buy the idea that government as a whole is sensitive to credit constraints. Obviously the federal government isn’t, and states are constrained by balanced-budget requirements at all times. But perhaps the ease of issuing state and municipal bonds has plummeted during the recession? I’m not sure.

Generally speaking, I suspect this chart says more about the housing/construction market in particular than it does about broader capital goods, which I think have rebounded fairly decently over the past year or two. It also says something about reduced state and local spending, though I don’t think it’s fair to call that a credit issue. It’s more a statutory problem combined with bad austerity policy at the federal level. Further thoughts welcome, though.

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate