krebscycle

Construction employment in Jan 1999: 5,192,000 in August 6,912,000

Construction employment in Jan 2007:7,295,000 in August 8,045,000

Note how during the Bush/Greenspan “boom” 2 million jobs were created in construction. All those people spent money and of course their employers were buying durable goods, buying real-estate, buying things like wall board etc. etc. and they were building commercial property like shopping malls that hired even more people ….

Now consider what was happening in manufacturing

Jan 1999 17,324,000    and August  17,363,000

Jan 2006 14,142,000 and August 14,288,00

During the same “boom”, manufacturing lost 3 million jobs. So when the recession struck, the collapse in the real economy that had been papered over by a real-estate boom was suddenly revealed – like one of those traps where when the thin layer of leaves and twigs break, you fall into the pit. The problem with the current economy is not that underwater consumers don’t have the confidence to spend, it’s that the manufacturing core of the economy has been hammered and when the giant real-estate Ponzi scheme evaporated, it turned out that there are a lot fewer people making decent wages than their were only a decade or so ago and there is also smaller domestic capture of domestic spending. Those closed electronics plants and machine makers were replaced with foreign manufacturing so stimulus dollars went proportionally to fewer US workers.