This column was originally published at MarketWatch.
Despite the devastation from Hurricane Sandy in late October, the U.S. economy showed remarkable resilience, adding 146,000 jobs in November. Over the past year, the unemployment rate improved by 1 percentage point, to 7.7 percent.
The economy continues to head in the right direction, though still not fast enough, and still faces a number of risks to labor-market strengthening—the biggest of which remains the potential for self-inflicted damage from bad policy decisions.
Today’s jobs report from the U.S. Bureau of Labor Statistics demonstrates the steady progress being made in the labor market recovery from the worst economic crisis since the Great Depression. The private sector has added new jobs for each of the past 33 months.
Unemployment rates are falling broadly across all groups. Compared to one year ago, the unemployment rate for men fell by 1 percentage point to 7.9 percent, while the unemployment rate for women fell 0.7 percentage points to 7.6 percent. Though still disproportionately high, unemployment rates for African Americans and Latinos improved even more over the past year, falling 2.3 percentage points to 13.2 percent and 1.4 percentage points to 10 percent, respectively.
Today’s report makes clear that, while positive, the pace of recovery remains inadequate. While the economy added more than 5.1 million private-sector jobs since February 2010, more than 12 million people still remain unemployed. Long-term unemployment—the number of people working part time but would prefer to work full time—and the number of “discouraged workers” in the economy—those who would like to work, but give up looking in frustration—improved only negligibly in November.
Average hourly wages of all private-sector workers are not keeping pace with inflation and declined nearly 2 percent in real terms in the year through November. Wage declines indicate that, while adding jobs, the jobs we are creating tend to be found in low-wage, insecure parts of the economy such as the retail sector, the leisure and hospitality industry, and home health care and nursing homes—where pay, benefits, and protections are low, and turnover is high.
Research from the National Employment Law Project shows that low-wage jobs made up 21 percent of all job losses during the recession but made up nearly 60 percent of job gains during the recovery, while middle-class jobs accounted for 60 percent of jobs lost in the recession but only 22 percent of new jobs in the recovery.
As the president and Speaker of the House John Boehner (R-OH) work to resolve the fiscal showdown and debt-ceiling obstacle, they and all Americans need to be aware of the severe economic costs of austerity cuts and tempting the fate of our government’s creditworthiness—lest we go down the path of economically stagnating European economies.
Instead, policy discussions now and beyond the fiscal showdown need to focus on accelerating job growth today and laying the foundation for a stronger economy built from the middle out for the long term.
Here’s why: If politicians do nothing to spur growth, prolonged job-market weakness will be in our future for some time. At the current three-month job-growth trend seen in today’s jobs data, the U.S. economy will not recover to “full employment” until June 2031. (see Figure 1)
While trend employment growth remains well above the pace of the 2000s business cycle—at which speed we would never recover to the prerecession employment rate—employment in the United States would not recover until late 2018 even under the rapid jobs-growth pace of the 1990s economic boom.
Economic recovery remains frustratingly slow in part because we have not yet transitioned from the trickle-down policies of the past to economic policies designed to strengthen America’s middle class and provide opportunities for more families to join the middle class. After capturing the lion’s share of income gains for the three decades prior to the Great Recession, America’s top 1 percent still captured 93 percent of all income growth from 2009 to 2010—the bottom 99 percent shared the remaining 7 percent.
Asking those who have reaped the lion’s share of rewards to pay slightly higher taxes while preserving tax rates for all Americans with incomes of less than $250,000 is an obvious place to start working toward fiscal balance and reorienting America’s economic strategy to the critical middle. The Senate has already passed this measure, but the Republican-controlled House of Representatives has yet to even schedule a vote.
As policymakers work toward long-term fiscal stabilization, though, it is also essential they provide what our economy needs to strengthen recovery today and economic competitiveness tomorrow. President Barack Obama offers this in his proposal to resolve the fiscal showdown, with $200 billion proposed for a payroll tax cut, expanded infrastructure investment, incentives for business investment, and renewed unemployment insurance, among other policies. Congress must take similar action if the pace of recovery is going to quicken and the livelihoods of all Americans are going to improve.
Adam S. Hersh is an Economist at the Center for American Progress.