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The Dismal New Jobs Numbers: A Problem We Can Fix
Washington, we have a problem. For the third straight month, job growth in the United States has been anemic. The net increase in employment – after subtracting losses from gains – was a mere 80,000 in June and new adjustments put the figure for May at 77,000 and for April at 68,000.
In other words, in the entire second quarter of the year, jobs increased by fewer than a quarter of a million. Normally, about 2 million Americans enter the labor force annually, so if we’re producing just a million jobs, more and more people are going to be out of work.
A couple of interesting comments: Academic economist John Lott, writing on the Fox News site, points out that the U.S. is NOT doing better than Europe. Yes, our horrible raw unemployment rate (8.2 percent) is lower than theirs (11.1 percent), but they define unemployment differently.
For a fairer comparison, we should look at the proportion of people working to the workforce as a whole. That way, we can take into account people who are so distressed by the job market, they have given up looking and are thus not counted as unemployed. Lott notes that since 2009, the labor force participation rate in the U.S. has dropped by three percentage points.
In the 17 countries of the euro currency, it’s dropped by half that. And David Malpass, the former Treasury official who heads Encima Global, the economic consulting firm and is a regular contributor to the Bush Institute’s economic growth website, writes: “The two-fold overarching problem is deep: the economy needs to be creating jobs much faster to bring the unemployment rate down, and full-time employment remains weak, meaning job skills for a growing portion of the population are atrophying with each additional month of slow and part-time hiring.”
The point about full-time employment is critical. It dropped by about 10 million between early 2008 and 2010, and it’s barely recovered – still down by about 7 million from the peak. Meanwhile, part-time employment is up 3 million over the past four and a half years.
A true recovery trades part-time employment for full. A true recovery is what we haven’t got. In fact, this is worst rebound from a recession since the 1930s. Three years after the mid-‘70s recession, we were growing at 5.6 percent. Three years after the early ‘80s recession, we were growing at 4.1 percent. Three years after the early 1990s recession, we were growing at 4.1 percent. Three years after the early 2000s recession, we were growing at 3.5 percent. Now, three years after the 2008-09 recession, we are growing at 2 percent.
Ultimately, our employment ills are a symptom of our lack of growth. When an economy grows, more people get hired full-time, and the unemployment rate drops dramatically. Between 2003 and 2006, during the George W. Bush presidency, the U.S. was growing at an average of 3 percent, and the unemployment rate dropped from 6 percent to 4.6 percent.
That’s what 3 percent growth can do. As for 4 percent: look at the Reagan years. From 1983 to 1988, growth averaged 4.4 percent, and the unemployment rate fell from 9.6 percent to 5.5 percent. During the George W. Bush years (2001-08, inclusive), unemployment averaged 5.3 percent. Right now, it’s 8.2 percent.
What to do? Concentrate on growth, growth, growth. Job creation doesn’t happen in a vacuum. It happens in an environment in which new businesses are being formed, new investments are being made, and energetic and creative citizens are being encouraged to take risks. That’s not happening now, but it could – and very quickly – if we got the policies right.
This post was written by James K. Glassman, the founding executive director of the George W. Bush Institute in Dallas, Texas. The Bush Institute’s first book, The 4% Solution: Unleashing the Economic Growth America Needs, goes on sale July 17, 2012.