New Commerce Department data released late last week show the U.S. economy expanded for the third straight quarter. However, this encouraging news of a continued economic expansion is likely to be dampened by new unemployment data on Friday.

Unemployment could remain high for years to come
An analysis by Economist Josh Bivens shows that the latest GDP growth, while clearly positive news, is not sufficient to generate the large number of jobs the country needs. Bivens explained that the 3.2% annualized rate of growth seen in the latest quarter was largely the result of inventory accumulations that would probably not be sustained going forward. But he also stressed that even if growth did continue at that clip for three straight years, the unemployment rate would still probably be higher than the peak unemployment rate—6.3%—seen during the recession of 2001.

Bivens also outlined a number of reasons why the economy will have trouble sustaining the current rate of growth: “Given that sustained, high unemployment puts severe downward pressure on wages, it is hard to see where the private demand for goods and services necessary to drive a durable recovery will come from without ever-retreating savings rates.” He pointed out that state and local government spending has been declining for three straight quarters, a sign of the “extreme fiscal crisis” at the state and local level. Bivens said this suggested that “states will be cutting spending and/or raising taxes for years to come … exerting a powerful drag on growth,” and said that “fiscal relief to states from the federal government would be very useful to lessen this drag.”

Trade policy and the American worker
EPI Founding President Jeff Faux, who has written extensively about trade and globalization, shares some of his thoughts about the legacy of NAFTA as well as current trade disputes with China, in a Q&A published on EPI.org. Faux argues that so-called free trade has not always been free and that an increase in global trade has typically hurt low-paid workers around the world while benefiting large multinational corporations. “The Chinese worker, or the Mexican worker, or the Korean worker is not the cause of the squeeze on the American worker,” Faux says. “It is the people who are exploiting these workers and the governments that allow it.”

EPI International Economist Robert Scott, whose recent work has focused on the role of Chinese currency manipulation in the U.S. trade deficit and the loss of millions of American jobs, last week published a Policy Memo calling on the United States to identify China, along with Hong Kong, Malaysia, Singapore, and Taiwan, as currency manipulators, and to impose tariffs if they do not revalue their currencies. Scott also stressed that a slight revaluation of the Chinese yuan will not be sufficient and argues that a 40% revaluation is needed to rebalance trade and capital flows.

In a recent letter to The New York Times, Scott also highlighted how a French manufacturer bidding for a major U.S. Air Force contract is using subsidies that the World Trade Organization has ruled to be illegal. Scott urged the Obama administration to take a tougher stand against such unfair practices that could cost tens of thousands of American jobs.

Intern update
A recent EPI newsletter outlined the broad impact of our research highlighting the inadequate regulation of student internships. Since the publication of Not-So-Equal Protection, the Department of Labor has posted a fact sheet on its Web site designed to help employers determine whether they are required to pay their interns, and at least one corporation has formally changed its policy and agreed to pay interns retroactively.

But that positive impact met with resistance on April 28, when a group of 13 university presidents sent a letter to U.S. Labor Secretary Hilda Solis, expressing concern over the Department’s “apparent recent shift toward the regulation of internships.” In response to that letter, EPI Vice President Ross Eisenbrey also wrote to Secretary Solis, noting that insofar as internships are really employment, rather than education, they are already subject to the minimum wage and overtime laws. He explained why the laws are so important in protecting student workers from exploitation. Eisenbrey’s letter is available on EPI.org.

EPI in the news
A New York Times story about the new GDP data quoted Josh Bivens warning that unemployment levels could remain high for years. Bivens’ GDP analysis also received international press attention, in the Sydney Morning Herald and Agence France Presse. The Black Voices blog quoted Algernon Austin, director of EPI’s Program on Race, Ethnicity, and the Economy, in a story about high unemployment among black workers. Austin argued that black workers suffered something of a “permanent recession,” in which jobless rates remained high through good and bad economic times.