The jobs lost during the Great Recession have never been recovered, costing the U.S. untold billions in wealth creation and tax revenues. The human tragedy ignored by politicians is worse.
The private sector added a mere 161,000 new jobs in July, making a mockery of Obama Administration claims that the U.S. economy continues to improve.
Even though the latest economic data show that the contraction during the Great Recession was slightly less severe than previously reported, it remains the largest decline since quarterly data became available in 1947. Cumulatively, real GDP fell by 4.3% during the recession. Moreover, the jobs lost then have never been recovered.
According to a U.S. Bureau of Labor Statistics report today, employment rose in retail trade, food services and drinking places, financial activities, and wholesale trade. Both the number of unemployed persons, at 11.5 million, and the unemployment rate, at 7.4% barely improved, and critics maintain the real unemployment rate is more than 10%.
Worse, in July, the number of long-term unemployed was unchanged at 4.2 million. These unfortunate individuals accounted for 37% of the unemployed. The civilian labor force “participation rate” was 63% and unchanged over the month.
The number of persons employed part time for economic reasons or involuntary part-time workers was unchanged at 8.2 million in July. These individuals abandoned by the ruling class in Washington, now on a five-week taxpayer funded vacation, were working part time because their hours had been cut back or because they were unable to find full-time work.
In addition, 2.4 million persons who were not in the labor force, wanted and were available for work, and had looked for a job sometime in the past 12 months. They are not counted as unemployed because they had not searched for work in the 4 weeks.
“A robust recovery would generate sufficient family-supporting jobs for all who are willing to work hard and play by the rules. Instead, job growth is weak and uneven – and the majority of new jobs are at the low end of the wage scale. Average weekly hours, average hourly wages and overtime hours are stagnant or declining,” said Richard Trumka head of the AFL-CIO.
According to Heidi Shierholz of the Economic Policy Institute (with extensive research assistance from William Kimball, Natalie Sabadish, and Hilary Wething), virtually every major indicator in today’s report means we have not entered into a real job recovery.
Shierholz maintains that because hiring remains very weak, the following six trends – all bad – are in the jobs numbers:
- Unemployment is elevated across the board—across all categories of education, age, gender, race/ethnicity, and occupation.
- Labor force participation itself is depressed.
- Underemployment is elevated.
- Long-term unemployment is elevated.
- Wage growth is depressed.
- There is disproportionate job growth in low-wage industries.
Shierholz says that that the unemployment rate is between 1.5 and 1.9 times as high now as it was six years ago for all groups. Today’s sustained high unemployment compared to pre-Great Recession 2007 cuts across all age, education, occupation, gender, and racial and ethnic groups. This supports her core thesis that the jobs crisis stems from a broad-based lack of demand. In particular, unemployment is not high because workers lack adequate education or skills, a favorite fig leaf of politicians. Instead, a lack of demand for goods and services makes it unnecessary for employers to significantly increase hiring.
The labor force “participation rate” fell one-tenth of a percentage point in July to 63.4% below the pre-recession 66% of December 2007. Shierholz claims that the majority of the workers who make up the drop in the participation rate since the start of the recession would be in the labor force if job prospects were strong. She cites Congressional Budget Office estimates of the current size of the “potential labor force” or the size the labor force would be if job opportunities were strong at 159.2 million.
The current U.S. labor force is 155.8 million. This means 3.4 million workers are “missing” from the workforce. Job growth is not yet strong enough to start drawing them back in. If those workers were in the labor force looking for work, the unemployment rate would be 9.4% not 7.4%.
The number of people working part time who want full-time jobs increased by 19,000 in July, to 8.2 million; there has been no improvement in this number in more than a year and a half. In 2007, there were 4.4 million people working part time who wanted full-time jobs.
The share of unemployed workers who have been unemployed for more than six months increased in July from 36.7% to 37%. While long-term unemployed share has improved from its peak of 45.3% Shierholz says, that improvement is “likely in part due to the scaling back of unemployment insurance benefits, as the requirement to look for work in order to maintain benefits kept some long-term unemployed actively seeking work and therefore counted as unemployed.” The long-term unemployed share is more than double pre-Great Recession rates since in 2007 the share averaged 17.5%.
ECI also points out that the average hourly wages for all private-sector workers declined by two cents in July, although this followed a 10 cent increase in June. Average hourly wages grew 1.9% during the last year.
“The economic link between high unemployment and low wage growth is straightforward; employers do not need to pay sizable wage increases to get and keep the workers they need when job opportunities are so weak that workers do not have other options,” says Shierholz.
What job growth there was occurred in low-wage sectors in July. One reason is that with more than three unemployed workers for every job opening, there are many desperate job seekers who have no choice but to accept low-wage work. These are jobs they would accept if job opportunities were strong.
ECI notes that the two lowest-paid major industries are retail trade and leisure/hospitality where restaurants and bars make up the largest share. Restaurants and bars increased jobs by 38,400 in July, higher than the average growth of the first half of the year at 34,700. Retail added 46,800 jobs in July at 23,400, also higher than the average growth of the first half of the year. These two industries contributed more than half of the total job growth in July.
Employment in the temporary help services industry, also low wage, increased by just 7,700 in July. This is slower growth than in the first half of the year, when the monthly increase averaged 20,400. Shierholz says that because of month-to-month volatility in the data, it should not yet be interpreted as a slowdown in job growth in that industry, which has been growing strongly.
Regardless of who would be sitting in the White House today, the job creation numbers would be equally anemic. The US must recognize that its economy is going through a “structural change.”
Comparing the current US economic recovery pace to those immediately following WW2 is meaningless. At that time, the USA was the only major economy functioning fully and producing at maximum rate because there was global demand for many of its goods and services.
Today, in a globalized economy where manufacturing jobs have been transferred to the most cost competitive countries, where service jobs are often performed offshore as well, where computerization and automation reduced the semi-skilled workforce, why is it surprising that the economy is not growing?
Wages are not growing at the lower level of the pay scale, consumers are overloaded with massive debt, cost of education is increasing 2x times of inflation, healthcare is a major risk and cost to the average household budget, consumer confidence is flagging, so how can aggregate demand improve substantially?
Under these anemic conditions, a mode of “small thinking” developed. As a sign of desperation, many of our politicians are celebrating when the monthly job numbers show a puny 10,000 unit increase – a mere rounding error – in a national workforce of 155 million, GDP approximately $17.00 trillion. And several months later when the US Bureau of Labor Statistics revises down the aforesaid puny numbers, the announcement is a mere muffled sound.
So considering the pressures and challenges confronting the US economy, it is doing as well as it can.
[You are right about the political manipulation of numbers in this thoughtful comment. Perhaps the post WW2 growth rates are unsustainable for the reasons you state. However, the first chart in the story looks at the growth problem for the last ten years, and it is abysmal. Subsidizing, via the bloated defense budget other countries is folly. Let Europe pay for its own defense. Our economic policies that allow exporting nations to manipulate their currencies to make U.S. exports non-competitive and flood the U.S. market with artificially cheap goods is also folly. The whole U.S. defense/trade policy needs a radical revision, as the job loses show. Governments, including ours, can change structures so structural change houses our unemployed. – editor]