Lack of Robust Job Creation Is a Worrisome Trend

Congress Needs to Address Labor Market Problems

SOURCE: Center for American Progress

Unemployed workers fill out job applications at a jobs fair in Detroit. The unemployment rate held at 9.7 percent in February as employers shed fewer jobs than expected, but job creation should continue to be a top priority for Congress.

By Heather Boushey | March 5, 2010

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The key story from today’s new data on the conditions in the labor market is that there’s little change. Employers shed 36,000 jobs in February and the unemployment rate held at 9.7 percent. This marks the fourth month of negligible changes in employment, and as of yet we’ve only seen one month of positive job growth. The bulk of the job losses were in government employment as local governments shed 31,000 jobs, 24,100 of those in education. Continued help for the unemployed and policies to promote robust job creation, including aid to help states maintain employment, remain our most important public policy goals.

The east coast’s “snowmaggedon” occurred during the week of the establishment survey and thus job gains may be underreported as firms may have delayed new hires to the following weeks. Looking at the detailed industry jobs picture, job losses in sectors such as construction and transportation, especially “scenic tours,” may have been affected by the storms, but that cannot account for the overall lackluster jobs picture. According to the Bureau of Labor Statistics, the household survey—the data where individuals report their labor market status—should not be significantly affected by the weather disruptions.

At this point in the economic cycle a lack of robust job creation is a worrisome trend for workers and for our economy. Given the breadth and depth of the recession, our economy needs a sharp upturn in job creation to come out of its current malaise. The economy has shed 8.4 million jobs since the recession began in December 2007 and the economy would need to add about 250,000 each month for the next three years just to regain the jobs lost.

Without vibrant job creation our nascent recovery will not fully take hold. Consumer spending makes up 70 percent of the U.S. economy and the lack of jobs is constraining spending. There are currently 15 million people seeking employment, 2.5 million out of work and wanting a job but not currently looking for one, and 9 million involuntarily employed part time rather than full time. Each of these 26.5 million people has incomes far lower than desired, and they aren’t able to be the kinds of consumers that our businesses so desperately need.

It remains the case that those without work are having an extremely difficult time finding new employment. A near-record 4 in 10 unemployed workers, or 6.1 million, have been out of work and searching for a job for at least six months, and there are six workers vying for every job opening available. It is taking the typical worker over 19 weeks to find a new job.

It is these workers who need Congress to extend jobless benefits. Yet the Senate has only voted to extend them for an additional 30 days. Congress should act quickly to extend jobless benefits and introduce an effective “off trigger” so that the unemployed in states that are continuing to see high unemployment and extended periods of joblessness are not unreasonably cut off from much-needed benefits. This trigger should be set so that states keep extended unemployment benefits until their economies are in recovery, rather than a hard deadline for the nation as a whole.

The only employers that are significantly ramping up hiring continue to be those in the health care and educational services industries, and those hiring temporary workers. The temporary help sector has been adding an average of 57,000 jobs per month since September, but added slightly less than that average—48,000 new jobs—in February. We have been pointing to the increase in temporary help as an early indicator of firms’ willingness to hire, but with five months of robust temporary jobs now having been created, the lack of follow-on hiring of permanent workers is disconcerting. On top of this, hours fell slightly last month, another indication that employers may be seeing a slackening in demand. Slightly lower hours, however, may also be due to the weather disruptions.

The House of Representatives passed a $15 billion jobs bill yesterday that will go to the president’s desk to sign. It is aimed at stimulating national job creation. The bill grants employers that hire workers who have been jobless for at least 60 days an exemption from paying their 6.25 percent share of the federal payroll tax for the remainder of 2010.

A key policy concern, however, is that government is now part of the jobs problem. Overall, all layers of government have shed 211,000 jobs since peaking in April 2009. In recent months, local government layoffs have escalated as local governments have shed half a percent of their jobs in the past three months alone. The American Recovery and Reinvestment Act provided aid to the states, which played an important role in maintaining government spending and employment through 2009, but that money has run out and Congress has failed to extend it. Without federal dollars, state and local governments will continue to act “pro-cyclically,” taking actions that only exacerbate the downturn rather than reinforce the move toward recovery.

Millions of families continue to struggle with unacceptably high unemployment. While some groups of workers have seen their unemployment rates stabilize (albeit at very high levels), others continue to see their unemployment rate rise: Last month, the unemployment rate among workers without a high school diploma rose from 15.2 percent to 15.6 percent, and rose from 10.1 percent to 10.5 percent among workers with only a high school diploma and from 17.6 percent to 17.8 percent among African-American men. Overall, wages rose by a quarterly annual rate of 3.5 percent last month, higher than the rate of inflation (the Consumer Price Index for urban), which was 2.7 percent from January 2009 to January 2010.

Focusing on job creation should continue to be a top priority, and we will need Congress to continue to address the range of problems at hand.

Heather Boushey is a Senior Economist at the Center for American Progress.

See also:

• Employment by the Numbers
• Unemployment Is About Families, Too by Joy Moses