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This morning's employment report blows a big hole in the remaining hopes for sustaining this economic recovery. This is the fourth month in a row in which the growth in employment has fallen below the level of the previous month and the poorest performance in job growth this year. If the June and July numbers are combined, only 110,000 jobs were created. Nominal hourly wages increased by only $.05 or $.02 short of the level needed to keep up with the pace of inflation thus far in 2004.

The July employment report combined with other recent economic data creates an economic picture that makes it increasingly difficult to concoct a credible scenario in which American households will have sufficient income to sustain economic expansion.

These numbers also make it clear that we are not in a normal business cycle, we are not experiencing a normal recovery and we need to formulate policies that address the weaknesses that are becoming increasingly obvious. The economy has 1,235,000 fewer jobs than it had in March of 2001 and the brief period of significant employment growth (since August, 2003) appears to be winding down. Despite enormous fiscal stimulus created by an explosion of federal borrowing, too little money has reached the pockets of average consumers. Growing productivity and falling real wages will temporarily help corporate profits, but they are concentrating wealth in the hands of fewer and fewer households and those households are not spending that wealth on the kinds of products that are creating jobs in this country. In short we have a demand-side problem to which we have applied supply-side solutions and the results are becoming increasingly ominous.

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