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In a provocative Op-Ed that appeared in The Wall Street Journal several weeks ago, Mortimer Zuckerman, the chairman and editor-in-chief of U.S. News & World Report, argues persuasively that America’s “Great Recession” continues, at least in terms of employment. He points out that 12.3 million people are officially unemployed today compared with 12.8 million in 1933 at the trough of the Great Depression. Furthermore, 6.4 million fewer people are at work today compared to 2007, the labor force participation rate has fallen to its lowest level since 1981, and the “true” unemployment rate is 14.5%, not 7.9%, if discouraged and marginally attached workers are included in the calculation. In addition, Zuckerman points out, 48 million Americans, or 15% of the total population, are currently receiving food stamps while 11 million are receiving Social Security disability checks, double the number compared to four years ago.
Clearly, something is wrong with America’s economic engine, currently sputtering along at an annual growth rate less than 2%. In fact, growth in the fourth quarter of 2012 was close to zero. Why isn’t the economy expanding at a faster clip? There are many reasons.
Corporate profits are high, but businesses are reluctant to hire and invest in view of fiscal and regulatory uncertainty. To make matters worse, a growing number of businesses, both large and small, have concluded that the insurance mandate under “Obamacare” will impose onerous costs on their operations. To that end, many are likely to cut working hours below 30 a week or pay fines to avoid the cost of enrolling employees in health insurance plans. Do the math. The penalty for not providing coverage is $2,000 per worker while insurance costs can range from $4,600 to $11,000 per year. Political brinkmanship in Washington is another drag on business confidence.
The economic news isn’t all bleak. The Dow Jones industrial average has been setting new highs, and household net worth is now back where it was before the Great Recession. But job growth remains sluggish with one notable exception: the energy industry. Over the past five years, employment by oil and gas companies has grown 28% while overall employment remains 3% below its 2008 level. Importantly, the industry has added more than 700,000 jobs without any new tax breaks, compared with about 75,000 jobs in the heavily-subsidized renewable energy sector. Not only do oil and gas jobs pay high wages and benefits, the industry has very strong linkages with a wide range of manufacturing and service businesses. So every new job in oil and gas may support three to four additional jobs across the economy.
The oil and gas industry is poised to create tens of thousands of additional jobs over the next several years that, in turn, can push us closer to energy independence — a prospect that should be embraced by politicians and pundits of all persuasions. But this will only happen if public policies are accommodating. By approving the Keystone XL pipeline, streamlining the permitting process for deepwater drilling in the Gulf of Mexico, allowing some lease sales on the outer continental shelf, and encouraging exports of liquefied natural gas (LNG), the White House can accelerate the timeline for North American energy independence while simultaneously helping to revive the lethargic economy.
Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University. He has taught at Rensselaer Polytechnic Institute, the State University of New York, the University of Texas at Dallas, and the University of North Texas. He has authored or co-authored numerous books, monographs, and articles on the subjects of economic development, energy security, public policy, and taxation. His work has appeared in professional journals as well as the popular press. He earned an A.B. degree from Dartmouth College and an M.A. and a Ph.D. in economics from Columbia University.Full Bio
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