If boosting US job growth and income is a priority for policy makers and our representatives in government, the latest economic reports on GDP and employment aren’t encouraging. Neither is the recent compromise deal to raise the US debt ceiling and cut the budget deficit. But the latest job growth statistics are just the latest data points in a trend that has been playing out for decades.
Middle class income and wealth continue to shrink dramatically as the U.S. loses relatively well paying, middle-income jobs. In fact, the distribution of income and assets has been concentrated in the hands of fewer and fewer to the point that the disparity is now higher than it was in the Roaring Twenties. And we all know what happened after that.
What Labor Market Research Shows
Has U.S. job growth been permanently crippled, or will things get back to “normal” once the housing market and broader economy pick up again? “No” seems to be the shortest and most likely answer according to economists and labor market experts.
Job growth projections for the U.S. vary according to recent labor market research. However, things aren’t likely to change much in the near future if prognostications are correct. They may even get worse before they get better. But as moribund as it is at present, all hope isn’t yet lost for the U.S. economy when it comes to creating jobs.
Rejuvenating the US economy and sparking job creation is going to require tough choices, however, both individually and collectively. It’s also likely to require rethinking our way of life, what we do for a living and how, where, when and why we work.
Labor Market Statistics Regarding Job Growth
In order to get a handle on the situation, let’s take a look at some recent job growth statistics.
400,000 a month: That’s the consensus figure for the maximum number of weekly jobless claims economists say is required to keep up with the net number of new job seekers in the US (In other words, to have a balanced labor market).
Unfortunately, weekly jobless claims totaled over 400,000 for 15 straight weeks before finally dipping to an estimated 398,000 the week ended July 22, according to the Bureau of Labor Statistics (BLS). The less volatile four-week moving average declined 8,500 to 413,750–and that’s in the midst of a recovery.
Then there’s the Bureau of Labor Statistics’ official unemployment rate, which has been on a downward trend since hitting a seasonally adjusted high of 10.1 percent in October 2009. A recent low was hit in March, when civilian unemployment fell to 8.8 percent on a seasonally adjusted basis.
It’s been ticking up since then, however, with the number of unemployed civilians increasing by 545,000 as of the end of June, when the official unemployment rate came in at 9.2 percent.
That 9.2 percent translates to 14.1 million unemployed civilians out of a total civilian labor force of 153.4 million. The “long-term unemployed,” those without a job for 27 weeks or more, amounted to 6.3 million, 44 percent of the total.
That’s not the broadest measure of civilian unemployment tracked by the BLS, however. Dubbed U-6, this metric adds in “marginally attached” workers who aren’t working but want a job and have looked for work in the past 12 months, “discouraged workers,” a subset of the marginally attached who aren’t looking for work for some reason related to the job market and those employed part-time because they could not find a full-time job.
The BLS’ U-6 for June came in at 16.7 percent. All in all, the total number of unemployed and underemployed Americans in the US civilian labor force as of end June came to approximately 25.6 million.
So what’s holding back job growth in the US? Is this a short-term phenomenon or are there long-term structural issues holding back job creation? Even more importantly, what can be done to get jobs growing again?
The Deal on the Debt
The deal to raise the U.S. debt ceiling came with a package of budget cuts expected to total more than $2.1 trillion over the next 10 years.
The compromise may reassure foreign and domestic investors in U.S. Treasury securities that the country is serious about getting its fiscal house in better order. It may also support the U.S. dollar and help allay fears of rapid inflation.
But does it address the longer-term, structural issues of flagging economic and job growth? Both sides agree that it doesn’t. Our government representatives are still wrangling over tax reform and subsidies, the health care and retirement systems, education and military spending, all policy areas that will have an impact on potential job growth.
There are those who believe the budget cuts included in the bill carry on protecting and favoring large corporations and the wealthy at the expense of the large majority of the population and the need to invest in critical infrastructure, economic development and social programs.
“We currently have a deeply depressed economy,” wrote MIT economist Paul Krugman in a July 31 NY Times Op-Ed article.
“The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.”
‘It’s The Economy, Stupid’
The current debt ceiling issue masks and diverts attention away from the real issues related to economic and job growth, says Robert Reich, former secretary of labor in the Clinton administration, now Chancellor’s Professor of Public Policy at the University of California at Berkeley.
“The federal deficit is not the nation’s biggest problem. The anemic recovery, huge unemployment, falling wages, and declining home prices are bigger problems. We don’t have a budget crisis. We have a jobs and growth crisis.”
Reich points out that the ratio of the national debt to GDP remains nowhere near its World War II high, when it reached 120 percent. “If and when the economy begins to grow faster–if more Americans get jobs, and we move toward a full recovery–the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current ‘budget crisis’ will evaporate,” according to Reich.
The Third Economic Revolution
Participating recently in a McKinsey Global Institute panel discussion entitled, “Job Creation and America’s Future,” Andy Stern, former president of the Service Employees International Union (SEIU), provided a useful broad perspective of the extraordinary degree of change the US economy has been experiencing in recent decades.
“I happen to believe history will say this is the third economic revolution in world history, and as opposed to a 3,000-year agricultural transition or a 300-year industrial we are having a 30-year massive transformation with an enormous amount of creative destruction. And so I think what we now know is the economy works differently, the markets work differently, business cycles work differently, and we’re not going to go into the future looking in the rear view mirror,” Stern said.
“In the third economic revolution countries are teams. Teams have plans. Germany has a plan. China has a plan. Singapore has a plan. USA has no plan. And what the roadmap is an attempt to try to make a plan at a unique moment of history. Team USA needs leadership and it needs a plan and this is a good place to start.”
The Stern Plan
A framework of Stern’s six-point plan, that he believes is critical if the U.S. is to reverse the depressing decades-long trends in career and job growth, is as follows:
1. There’s a misdistribution of income. Too much consumption is going to a certain group of people.
2. Give American workers a raise. Work has to pay, that’s the nature of the American story. It’s not paying and hasn’t been for 30 years.
3. The reason there is less innovation and less new job performance is because we have monopolies coming back into our economy. You don’t have innovation and new business development in monopolistic economies.
4. We need a pro-American trade policy, when 90% of Microsoft software in the Chinese government is pirated. China has a pro-China trade policy, Germany has a pro-Germany trade policy. We have a very idealistic trade policy that’s not pro-American.
5. We have an employer-based health care system that’s ridiculous. It costs 6 percent more of GDP. Give us 6 percent more of GDP and we could solve our budget and deficit.
6. The same thing is true with retirement, and the VAT tax, which every other country uses to have preferences to exports and penalizes imports. We don’t. So we have a plan that guarantees that we will not succeed and we don’t want to talk about a lot of these things, so we talk about education.
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