As former President Donald Trump warned about an economy that’s on the verge of not just a recession, but a full-blown depression, the country should prepare for a rapid slowdown in employment, say experts.
Falling labor force participation, along with inflation, could provide the double whammy that creates an economic crisis this fall, they say.
Historic inflation, on top of the lingering effects of COVID-19 policies, has contributed to a sense of pessimism among many in America.
Democrats have relied on this self-inflicted crisis to pass unprecedented, socialist policies, the critics said.
Those policies, some critics told The Epoch Times, have served to set up the country for further crisis.
One critic worries that such a crisis will provide progressives with their latest excuse to force the country to the far-left before the November election in an attempt to buoy their electoral hopes.
People shop in a supermarket as inflation affected consumer prices in Manhattan, New York City on June 10, 2022. (Andrew Kelly/Reuters)
Mobilizing the Base
“Much of what they are doing is trying to mobilize their radical base and keep it mobilized for the November election,” conservative business consultant and political commentator Craig Huey told The Epoch Times about Democratic economic policies.
In order to keep their voters mobilized, Democrats have come to rely on a crisis atmosphere, said Huey.
So an economic crisis, with people losing their jobs, while contrary to normal political wisdom for a party in the White House, is what is driving Democrat strategy under President Joe Biden, said Huey.
“It’s an ideological driven-bureaucracy” that needs to drive ideological voters to the polls, Huey said about the strategy.
Similarly, Sen. Rick Scott (R-Fla.) said that the Democrats are fully aware of the harm that Biden and the Democrats are doing to the economy by inflationary spending that discourages working.
“For too long, the Left has pushed irresponsible, job-killing socialist policies, paired with reckless spending and tax hikes, causing higher inflation and a staggering $30 trillion in debt,” said Scott in a statement to The Epoch Times.
A “now hiring” sign at a Home Depot store in San Rafael, Calif., on Aug. 5, 2022. (Justin Sullivan/Getty Images)
US Labor Force Declining
Scott said that one consequence of Biden’s policies is a labor force participation rate that is “shockingly low” already.
The rate at which able-bodied Americans have remained in the labor force has sagged from a post-COVID-19 high of 62.4 percent in March to 62.2 percent in July.
The decline, some argue, has diminished the gloss from the 20 percent in labor force gains the economy has made since Biden was inaugurated and the country generally gave up on COVID-19 lockdowns.
And while the employment report last month by the Bureau of Labor Statistics (BLS) added 372,000 jobs, the BLS household survey showed that, in fact, 315,000 fewer people had jobs in July versus June, as 353,000 people permanently left the labor force.
Jobs came in red hot for July with another 535,000 jobs added, but another 63,000 people left the labor force. Since March of this year, there are 168,000 fewer Americans with jobs according to the BLS household survey, despite the fact that month after month the BLS reports big job gains.
It’s a trend that has coincided with accelerating inflation.
Job Openings, Hours Worked Are Falling
On Aug. 1, industry data reported by Reuters from the private employment specialist Homebase said that hours for workers declined by 12 percent in July for small business workers tracked by their company.
Earlier this week there were further signs of a cooling job market.
The BLS reported on Aug. 2 that the number of job openings decreased by about 600,000 jobs month-over-month to 10.7 million openings. That’s down from a record high of 11.9 million job openings set in March.
Federal Reserve Board building on Constitution Avenue is pictured in Washington on March 19, 2019. (Leah Millis/Reuters)
Rising Interest Rates and Higher Unemployment
Professor Peter Morici, an economist at the University of Maryland, told The Epoch Times that it’s an open question about how badly the Federal Reserve wants inflation to get to its target rate of 2 percent.
He likens today’s economy to the 1980s under Federal Reserve Chairman Paul Volker, who brought inflation down from 14 percent to 3.2 percent by bringing interest rates up to nearly 20 percent.
“I don’t know that they are willing to keep interests so high to get inflation to 2 percent,” said Morici.
Morici said that it might take an unemployment rate of 9 percent to get inflation much below 4 percent.
“This is a very different economy than the pre-COVID-19 economy,” said Morici.
The economy, under the Democrat’s vision, is willing to pay extra costs to transition to a green economy by not using oil and gas and generally paying more for labor.
“It means a lot of capital is badly used,” added Morici.
The Case Against a Crisis
But Morici feels that Democrats don’t want to precipitate a crisis for one simple reason: He thinks that establishment figures, including members of the Federal Reserve’s Open Market Committee, will do what they can to prevent Trump from becoming president again.
“That’s the last thing that they want to happen,” Morici concluded.
The implication is that the Federal Reserve will try not to allow unemployment to go up too much, less it improve Trump’s chances to win the presidency, said Morici.
Federal Reserve Board Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee (FOMC) at the headquarters of the Federal Reserve in Washington on July 27, 2022. (Drew Angerer/Getty Images)
Progressives Want Lower Interest Rates
The House progressive caucus has said that “disadvantaged, lower-paid, and Black and Latino workers are disproportionately harmed,” by rising interest rates, pleading with central bankers to keep interest rate hikes to a minimum saying “the burden of high costs is not borne equally.”
“With wage growth declining in recent months, our country’s lowest-paid, most vulnerable workers have endured too much already to be sacrificed in pursuit of severe rate hikes that have far too often triggered recessions,” said Rep. Pramila Jayapal (D-Wash.), chair of the progressive caucus.
The Federal Reserve, however, has responded to talk from economists, the stock markets, and politicians that the central bankers might not be that serious about the 2 percent inflation target by publicly reiterating that they will continue to raise interest rates until inflation moderates.
While the Federal Reserve has talked about a “soft landing” where they raise interest rates without a recession as they try to combat inflation, Bill Dudley, the former president of the New York Federal Reserve acknowledged recently that at this point inflation is so high that “they have to push up the unemployment rate” to bring inflation down.
And the Federal Reserve has made clear this week that they’ll keep at higher interest rates until they get inflation back to 2 percent, even while politicians and the stock market fret about employment.
“Our intentions are really about making sure that people recognize that we are not completed with our fight against high inflation because these prints of 9.1 percent [inflation] are harming American families, harming businesses trying to figure out how to do their business and expand and we are committed to getting that back down to something closer to 2% which is our price stability target,” San Francisco Federal Reserve President Mary Daly told reporters on a conference call on Aug. 3.
Tension Between the Federal Reserve and Politicians
The result is increasing classical tension between Federal Reserve policy that favors higher interest rates in an inflationary environment—and the consequent unemployment that will be created by higher interest rates—and the politicians who want to keep inflationary spending going.
The tension is likely to come to a head at some point.
“It’s time for Republicans and Democrats in Washington to wake up and stop endorsing reckless, inflation-fueling spending that is crushing American families,” Scott told The Epoch Times.
Scott asserted that despite the inflationary pressure that Biden’s policies have created, “he has done nothing to reverse course” and instead has expanded those policies in response.
“Democrats’ only answer is another wasteful, tax hiking proposal that will kill more jobs and raise costs on families, especially our seniors, who are already struggling,” said Scott.
And until the classic tension between inflationary spending and the unemployment it will create is resolved, the crisis atmosphere will, at the very least, continue, if not almost certainly expand, critics said.
In part, the crisis could continue because Democrats see rising prices and unemployment as the way by which they can continue expand government control over Americans if not over elections, Huey noted.
“But the Biden administration and the left appear to be perfectly fine with inflicting this pain on Americans,” experts at conservative think thank The Heritage Foundation argued in a recent commentary, saying that the Democrats’ “Inflation Reduction Act” and other Democrat policies do the opposite of what the policies’ titles imply.
“In fact, rising energy prices are not unintended consequences of their policies, but rather the envisioned outcomes,” the commentary continued.
The same could be true of unemployment if it serves the best interest of the far-left, warned Huey.
“Obviously they know that when there is a crisis they can gain power and control, they can expand the scope of government over the lives of individuals,” Huey said of Democrats.
“They are so ideologically committed to the creation of a socialist utopia that the reality of economics means nothing to them” in their quest to retain and expand power, Huey added.
The Epoch Times has reached out to the White House for comment.