Wednesday, December 2, 2009

Private Employment Lower Than A Decade Ago

It may take the threat of mid-term elections next year to spur congress into action to stimulate jobs. Private sector jobs have dipped to levels from a decade ago while firms are learning to function effectively with fewer workers. See the following from Economist's View for more on this.

Private sector employment is lower than it was a decade ago:
A Lost Decade for Private Sector Jobs, by Jon Hilsenrath, Real Time Economics: To mark this week’s focus on the dismal state of the U.S. job market, check out the following chart, which shows the trajectory of private sector U.S. employment since 1998. It tells a story of a lost decade for U.S. workers.

The U.S. now produces fewer private sector jobs than it did a decade ago. This been the case since August, and it’s getting worse. ... Not since the Labor Department began tracking payroll employment in 1939 has there been such a stretch with no net job gains. ...

With the economy recovering from last year’s shock, private sector firms might start hiring again. But it likely will take months if not years to make up this gap.

How to explain the gap? One obvious answer is that the U.S. has suffered through two recessions during this stretch. The first, in 2001, was short and mild but included more than two years of job cuts. The second one starting in 2007 has been long and brutal. The other answer is that the U.S. has enjoyed a big burst of productivity growth during this stretch — which means firms are producing more with fewer workers. In the long-run this is supposed to be a good development because it leads to profit and income gains. But the short-term costs are looking increasingly more debilitating.

It’s worth nothing that overall employment is higher than it was a decade ago, but that’s only because the government has produced two million additional jobs during that stretch. You can expect both sides of Washington’s political spectrum to spin the lost decade for jobs in their own direction. Republicans will use it to blast Mr. Obama’s big government approach — though it’s worth remembering that most of these jobs were lost when a Republican controlled the White House. Democrats will use the data to demonstrate the benefits of a helping government hand in down economic times. ...
The administration is holding a jobs summit later this week, but the fear is that it is more for show than anything else, and it is not clear what, if anything, will come of it. If so, that's a mistake. The administration needs to do more than just acknowledge that it "feels your pain," it needs to alleviate some of the problem with a jobs program that produces results. The midterm elections are less than a year away, and there's every indication that when the election is held the employment problem will still be present and that could be problematic for Democrats.

I don't like using the election as a reason and motivation to do something about this problem, the struggles that the unemployed face should be enough on its own to motivate action, but if elections are what it takes to move congress and the administration to do something about this, then I suppose we'll have to settle for that. But given the lags in the process of creating jobs, I'd say six months is optimistic, there's only a month or two left before it will be too late to do anything in time to affect employment before the election. And if it doesn't get done in time to help congress get votes, it's unlikely it will get done at all no matter how bad the problem gets.

One final note. Timidity the first time around -- even if it was driven by political realities -- is part of the problem. With a more aggressive package employment would likely be much improved right now, but unfortunately that's not the policy that was implemented. If the administration puts a jobs program in place that is too reserved and does little to help with employment, that will make its political problems even worse since it will appear that its job policy was largely a failure. If it does move on a jobs program -- as it should -- it needs to be sufficiently aggressive and it needs to target jobs directly. Then we should all cross our fingers, not because of worry over the election (though losing ground would be a big disappointment for Democrats), but in the hopes that jobs will come to households struggling to make ends meet.

[Note: A version of this is also posted at MoneyWatch.]

This post has been republished from Mark Thoma's blog, Economist's View.

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