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More Job Creation Needed

Latest Employment Numbers Should Prod Congress to Act

SOURCE: AP/David Goldman

A man looks over a brochure while attending a job fair at a Goodwiill store in Atlanta on October 4, 2011.

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September’s jobs numbers add one more data point in a series of depressing statistics expressing what all of America already knows. Most people are struggling, yet relief in the form of employment and growth policies is being held hostage by political demands to preserve tax privileges enjoyed only by the wealthy few and large corporations, alongside calls to dismantle popular and economically important social safety net programs. No wonder the other 99 percent of Americans not sharing in the economic benefits are taking to the streets across our nation. Still, the economy has added nearly 2.1 million jobs and 2.6 million private-sector jobs in the past year and a half.

What the U.S. economy needs—and needs now—is jobs. And the way to create jobs and get the private sector hiring is by spurring fiscal demand with job-creation policies. This is exactly what President Barack Obama’s proposed American Jobs Act would do. Failure to act today jeopardizes U.S. national economic competitiveness and undermines opportunities for America’s poor, lower-, and middle-income families—the other 99 percent who are the core of our sustainable growth.

Employers added just 103,000 jobs in the United States last month, and the unemployment rate held constant at 9.1 percent as political obstructionism, retrenchment of state and local government services, and mounting global economic risks took their toll on American workers. The private sector added 137,000 new jobs in September, but 45,000 of these were formerly striking Verizon workers returning to work, meaning that private-sector employment growth is actually that much lower than today’s headline figure indicates. Over the past three months, private-sector employment growth averaged just 117,000 jobs per month, far short of the pace needed just to keep up with a growing population of working age adults. And overall, job growth in the U.S. economy is weakening as fiscal demand and job policies wind down. (see Figure 1)

Private jobs growth weakening as fiscal demand runs out a economic risks rise

And there are few hints of a silver lining that the U.S. labor market could turn north in the near future—certainly not on a scale that is up to the task of digging out from the deep jobs hole still left after the financial crisis and Great Recession. Hiring in temporary employment services, often a harbinger of future permanent hiring, notched up by only 19,000 new jobs. And average work hours, a sign that demand for labor is recovering held essentially unchanged in September at 34.3 hours.

Over the past year, the average work week for workers in the nonfarm private sector was up less than half an hour. The population of people working part-time due to slack labor demand jumped by more than 440,000 in September. For the first time in a long time, though, average wage gains appeared to outpace inflation last month.

Threats to shutter the federal government in September, following threats to drive the United States to default in July and August, once again undermined business and consumer confidence in the direction of the overall economy, holding back new hiring. And increasing global economic risks of the still-looming financial crisis in Europe and the slowing of economies in Asia weighed on hiring in the manufacturing sector. After a string of months with slow but steady growth, manufacturing employment lost 13,000 jobs in September on the heels of 4,000 lost jobs in August.

Compounding impediments to private-sector hiring are continuing retrenchment of state and local public services and public service workers. (see Figure 1) In early 2009, swift action to buttress public services from state and local governments helped stabilize local labor markets. The State Fiscal Stabilization Fund, a $53.6 billion component of the February 2009 Recovery Act, helped keep teachers and public safety workers on the job serving communities across the country.

Nearly 82 percent of this stabilization fund money was targeted at helping states keep teachers in our children’s classrooms. The fund worked to insulate schools from the worst ravages of the recession, but as State Fiscal Stabilization Funds ran out, states and localities were forced to cut back on what economists identify as the most critical component for long-term growth: education. Between July 2010 and September 2011, states and localities cut 192,000 jobs for education professionals, including 26,000 last month alone. (see Figure 2)

State and local education cuts weigh on today's labor market and long-term growth

With U.S. economy not delivering the oomph needed to deliver relief to wanting Americans, labor market misery remained stubbornly high. (see Figure 3) For the 14 million workers counted as unemployed, the median duration of unemployment crept up in September from 21.8 to 22.2 weeks, and has held above 20 weeks for the past 19 months. The unemployment rate for young workers and recent college graduates improved somewhat, from 17.7 percent last month to 17.4 percent in September. Young workers have not seen an unemployment rate below 17 percent since April 2009. The unemployment rate was little changed for the economy overall and for more vulnerable African American and Latino workers in September, and in the most recent data, there were more than four unemployed workers for every available job opening.

labor market misery remains stubbornly high

In a separate release from the Department of Labor last week, we learned that the economy had been more productive at creating jobs in 2010 than was previously thought. The Bureau of Labor Statistics periodically “re-benchmarks” employment data as better information becomes available about the birth and death of new firms—a notoriously difficult thing to predict in the shift from recession to economic recovery. As it turns out, the economy added an additional 192,000 jobs in the year from March 2010 to March 2011 than we previously thought. That’s news that employment-creation policies pursued in 2009 and 2010 that halted the free falling U.S. economy worked even better than expected.

But this news is little consolation as economic and political forces are conspiring to hold relief for America’s workers at bay. What the economy needs now is swift policy action to break us free from this jobs and growth rut. Middle-class families and America’s economic competitiveness can’t wait for November 2012.

Adam S. Hersh is an economist at the Center for American Progress.

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