One dog has yet to bark in this long winding crisis. Beyond riots in Athens and a Baltic bust-up, we have not seen evidence of bitter political protest as the slump eats away at the legitimacy of governing elites in North America, Europe, and Japan. It may just be a matter of time.
One of my odd experiences covering the US in the early 1990s was visiting militia groups that sprang up in Texas, Idaho, and Ohio in the aftermath of recession. These were mostly blue-collar workers, – early victims of global "labour arbitrage" – angry enough with Washington to spend weekends in fatigues with M16 rifles. Most backed protest candidate Ross Perot, who won 19pc of the presidential vote in 1992 with talk of shutting trade with Mexico.
The inchoate protest dissipated once recovery fed through to jobs, although one fringe group blew up the Oklahoma City Federal Building in 1995. Unfortunately, there will be no such jobs this time. Capacity use has fallen to record-low levels (68pc in the US, 71 in the eurozone). A deep purge of labour is yet to come.
The shocker last week was not just that the US lost 467,000 jobs in May, but also that time worked fell 6.9pc from a year earlier, dropping to 33 hours a week. "At no time in the 1990 or 2001 recessions did we ever come close to seeing such a detonating jobs figure," said David Rosenberg from Glukin Sheff. "We have lost a record nine million full-time jobs this cycle."
Earnings have fallen at a 1.6pc annual rate over the last three months. Wage deflation is setting in – like Japan. Interestingly, The International Labour Organisation is worried enough to push for a global pact, fearing countries may set off a ruinous spiral by chipping away at wages try to gain beggar-thy-neighbour advantage.
Some of the US pay cuts are disguised. Over 238,000 state workers in California have been working two days less a month without pay since February. Variants of this are happening in 22 states....MORE