Obama and Business May Get On Well, but When Will That Produce Jobs?

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Obama and Business May Get On Well, but When Will That Produce Jobs?

By SIMON JOHNSON

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This should not be an uphill struggle – much of the corporate sector, particularly bigger and more global businesses, is doing well in terms of profits and presumably, at the highest levels, compensation. But when exactly will this approach deliver jobs and reduce unemployment? And does it increase risks for the future?

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In reality, the opposite was the case. Relative to any postwar recession, the rebound in profits during the Obama administration has been dramatic. To be sure, the end of 2008 was shocking to many entrepreneurs and executives, as credit was disrupted in a much more dramatic fashion than they thought imaginable. Large and immediate cuts in employment followed.

But then the government saved the failing financial sector. The means were controversial, but the end was essential – without private credit, the United States economy would have fallen far and for a long time.

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Profits for the private sector fell no more than 20 percent from top to bottom in the cycle, and in the third quarter of last year (the latest available data from the Bureau of Economic Affairs), profits were back at the level of 2006. After the deep recessions of the early 1980s, it took at least three times as long for profits to come back to the same extent (I went through this comparison in more detail last week for The New York Times’s Room for Debate).

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