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You don’t matter, you are only part of the labor force. And there are more of you than is needed. Under normal circumstances, job losses of 345,000 in a single month would be a matter of consternation, particularly because job destruction is continuing at the same pace. What has changed is that for several months, hiring was virtually at a stop. However, in May some hiring began again, though far below the reduction in jobs. This is taken as a sign that there is hope for a new economic cycle. To give you an idea, 345,000 jobs is more losses than any month in the last downturn. The Bush economic cycle created only as many as 345,000 jobs in a month twice: October of 2004, and November of 2005. But the village has moved on.

The country isn’t about to, the time between a deceleration of job losses, and the return of net jobs gains, is usually around 6 months. However, in depressionary cycles, it can be a year, or more, between the first moment that businesses decide that labor isn’t all that expensive, to the time when labor seems worth having in quantity. There is a better than 50% chance that every month of 2009 will see job losses. As the chart shows, this downturn is already deeper, as a percentage of jobs lost, than all but two since World War II; and it looks set to pass 57-58 by next month. More or less, we are seeing the economy demobilize from a war time economy. However, there is no government vision to put people back to work building a civilian economy. This means we are going to fall like ’48, and rise like ’04.

The people who really matter are the people financing America’s debt addiction. Whether it is a trade deficit or a budget deficit, the outcome is the same: someone else must direct capital to the US, hoping to get more back by doing this than by investing in their own economies. One of the most important players in this game is China. China, remember, does not make that much profit on what it does for the rest of the world. There are grocery store chains that have higher net margins than China does as a manufacturer. However, almost all of this profit is concentrated into the hands of its central government. As Martin Wolf quipped: "It is the most capitalist state in the world, that owners of the capital, the government, are getting all of the profits."

It is the appetite of the bond holders for US debt issues that matter: if they don’t want more bonds, then more cannot be sold. The signal from the recent exchange between Geithner and China, as well as a spike up in long term interest rates, tells a very simple story: China is near it’s saturation for US bonds, and the US must sell fewer. That means that deficit reduction is now going to be the religion of the executive branch. The short unhappy life of Keynesianism is over, and neo-classical deficit attention is back in control. The bond holders eased up on buying bonds, which meant interest rates rose. Suddenly, on message, the Obama economic team is all about fiscal sustainability. They know that if interest rates rise, then the current US debt load is untenable without massive inflation. Since massive macro-inflation would be a transfer from the US, to those who sell us oil, and would lead to the end of dollar hegemony, they can’t do that.

That means pain and suffering.

Bernanke’s remarks to Congress lay out the plan from the Obama administration: as slow a recovery as can be gotten away with, with as little fiscal stimulus as possible to prevent collapse back into free fall. However as the last two depressionary cycles have shown, this means that hiring will not return above job losses, and that the time before labor shortage, and therefor generally rising wages, is a very long one. How bad is it now? An acid observation: the unemployment rate among African Americans has stopped going off. They’ve laid off all the minorities they can. Instead white males are seeing continued massive increases in unemployment.

The good news is that corporate profits are back, and the public is happy. It might seem a contradiction, but it is not. In this economy the pain has fallen disproportionately on a small percentage of the workforce, but their prospects are virtually wiped out. The debt to pay off the bank bail out largely falls on the future, in the form of lower health care access and no pensions. The people who are doing well in the present see much lower prices and their jobs are basically secure. They think.

It is this that is behind the craziness growing on the right wing: the construction jobs and auto dealerships, the franchise owners and shopkeepers, the real estate agents and loan officers, have seen their futures evaporate; and no one seems to be offering them any answers, except pain and suffering.