Center for American Progress

The Great Recession Is Over, but Will It Be a Great Recovery?

The Great Recession Is Over, but Will It Be a Great Recovery?

New employment numbers show that the American Recovery and Reinvestment Act has injected new momentum into the economy, writes Heather Boushey.

An employe works inside the Baldor Electric Company's factory in St. Louis, Missouri. Employment numbers show that the pace of job losses in manufacturing is slowing, and employers are adding more hours. (AP/Jeff Roberson)
An employe works inside the Baldor Electric Company's factory in St. Louis, Missouri. Employment numbers show that the pace of job losses in manufacturing is slowing, and employers are adding more hours. (AP/Jeff Roberson)

The unemployment rate fell in November to 10.0 percent and job losses were negligible, with only 11,000 jobs lost last month, both far better than expected. The Bureau of Labor Statistics also revised the number of jobs upward for the prior two months and the economy only shed 139,000 jobs in September and 111,000 jobs in October.

Today’s report contains some unambiguous good news for workers and their families. But it does not mean that we are fully out of the woods. There are indications that employers are beginning to need to ramp up hiring, but have yet to actually do so. At the same time, the household survey shows that those without a job continue to face extremely daunting challenges in finding new work.

This data does provide clear indications that the American Recovery and Reinvestment Act, which was signed into law last February, has worked its magic and injected momentum into the economy. Now we need to continue to focus on job creation, particularly for the most vulnerable, in order to ensure a strong and sustained economic recovery.

Economists estimate that most of the 2.8 percent economic growth shown in the third quarter was due to the economic boost provided by the recovery funds. But there are concerns that demand will again fade as those dollars dry up. Some demographic groups—particularly workers of color, young and older workers, and less educated workers—continue to face an especially tough labor market.

graph of long-term unemployment

The service-providing industries added 58,000 jobs last month. Education and health care both grew last month, adding 11,100 and 21,000 jobs, respectively. One of the largest gains in employment last month was in the temporary help industry, which added 52,000 new jobs. This industry has added an average of 37,900 jobs over the past three months. This is an indication that employers are feeling pressure to add to capacity, but they are not yet ready to commit to a new hire. Given that overall economic growth has been positive, but rather tepid, this could mean that employers are worried that demand will fall once the recovery dollars stop flowing through the economy.

graph of changes in temporary help

Another indication that employers are ramping up production and in need of more labor is that the average work week rose last month from 33.0 to 33.2 hours. Hours rose by 0.3 in the manufacturing sector, up to 40.4 hours per week, and overtime rose by 0.1 to 3.4 hours per week. Employers have yet to add workers in manufacturing—41,000 manufacturing jobs were shed last month—but the pace of job losses in manufacturing has slowed. This industry lost an average of 106,000 jobs per month between December 2007, when the recession began, and June 2009, when the pace of job losses in manufacturing began to slow.

The construction sector also continued to shed jobs last month, but most of that was in nonresidential construction, which shed 28,500 specialty contractors last month. There are indications that the recovery dollars are putting construction workers back to work as 5,200 heavy and civil engineering construction jobs were added after 17 straight months of job losses.

November’s declining unemployment rate is the result of 325,000 fewer people reporting being unemployed—that is out of work and actively available and searching for a new job—combined with an increased of 291,000 people who report being out of the labor force—which is not working, but also not actively seeking employment. Labor market exit is common in this kind of economy. The level of discouragement is at historic levels, with more than six workers for every job opening. Last month, 861,000 workers reported that they would like a job, but gave up searching—and are thus not counted among the unemployed—because they became so discouraged by a fruitless job search.

Workers’ hourly wages also grew in inflation-adjusted terms. Nominal wages grew by an annualized quarterly rate of 2.6 percent last month, and the Consumer Price Index—the standard measure of inflation—fell by 0.4 percent from October 2008 to October 2009.

The labor market picture continues to be very grim for those who are out of work. The typical unemployed worker has been searching for work for 20.1 weeks, and the share of the unemployed who have been out of work and searching for a job for at least six months rose to a record high of 38.3 percent. This should fall if the demand for workers continues to grow, but we need to ensure that we do not leave any demographic groups behind during economic recovery. The unemployment rate among teens is 26.7 percent, and it is 15.6 percent among African Americans, 12.7 percent among Hispanics, and 15.0 percent among those without a high school diploma.

We need to continue to focus on job creation to ensure that this nascent recovery transitions into a great recovery. Congress should make sure that the extended unemployment benefits that go to the long-term unemployed, which were passed as a part of the Recovery Act, do not expire as planned at the end of December. Extending the subsidies to help the unemployed purchase health insurance—or, better yet, giving states the option to put unemployed workers on Medicaid—must also be done before the end of the year.

President Barack Obama’s job summit could not have been better timed. There are a few key steps that Congress should take to boost jobs and ensure that all workers can benefit from a recovery. These include additional funding to the states to help them avoid more job losses and continue services; spurring the creation of millions of mostly private-sector jobs by directing additional federal money into youth and young adult employment programs; investing in child care, afterschool programs, and in-home health services for the elderly and disabled; and training those serving America’s youngsters, oldsters, and disabled. Nonprofit groups and small businesses provide most of these jobs, but they are paid for by programs that are currently being cut by state and local governments. Funneling funds into these programs would help quickly get people into jobs while supporting families and communities by providing much-needed services.

More from the Center for American Progress on job creation:

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Heather Boushey

Former Economist

Member of the Council of Economic Advisers and Chief Economist to the Invest in America Cabinet