Common Sense: Where are the jobs?
By Jeff Whitten
This economic recovery is often described as a jobless recovery. We are two years and two months into the recovery and unemployment in the nation stands at 9.1 percent.
At this same point in the recovery from the 1981-82 recession, unemployment was at 7.3 percent. Unemployment had higher to fall in that recession because it peaked at 10.8 percent as compared to 10.2 percent in this one.
These rates only count people who are looking for work as unemployed and count those working part-time as employed even if they want a full-time job.
If you count discouraged workers and part-time workers who seek full time employment, we have a 16.1 percent unemployment rate.
This broader unemployment rate peaked at 17.4 percent in September of 2009. This is the highest percentage since they began keeping records in 1994.
The previous high was in January 1994 at 11.8 percent.
The average number of weeks of unemployment at 40.4 is at an all-time high since they started keeping records in 1948.
The longer people are unemployed, the less likely they will find a job. They lose workplace contacts and their skills become rusty or outdated. Some companies will not even hire anyone who is unemployed.
More than half of the unemployed are over 35 and five million are over 45. Some of these people may face age discrimination.
The number of jobs lost in the recession was 8.4 million. It takes 125,000 jobs a month just to match population growth.We have not had that kind of job growth since April.
The number of jobs has only been growing for the last nine months. In only five of these months has job growth been larger than 125,000.
However, some of this is due to government layoffs, as the private sector has created at least 125,000 jobs seven times in the past nine months.
For every one job, there are about six people looking for work. This is much higher than anytime since they began keeping records in the past decade. Before the recession, there were only two or three jobseekers for each opening.
The unemployment rate in McNairy County is 11.2 percent.
Unemployment in our county peaked at 15.9 percent in March 2009, the highest on record. Records are only available since 1990. The previous peak was 12 percent in June1994.
We all long for the good ol’ days in May 2000, when unemployment was 3.8 percent, the lowest on record in McNairy County.
Why does unemployment remain so stubbornly high in this economic recovery?
It is not that companies can’t afford to hire people. As of early 2010, non-financial companies held $2 trillion in cash.
Companies say they will not hire until unemployment falls, but unemployment will not fall until they start hiring.
They cannot sell their goods and services if people either don’t have the money to buy them or do and are afraid to spend it because they fear they will lose their jobs or have their hours cut.
One explanation that has been offered is that businesses won’t hire because there is too much uncertainty as what their costs will be. Two specific types of costs commonly mentioned are healthcare and taxes.
Healthcare costs have been going up faster than inflation for a long time. Last year, the Affordable Care Act, or Obamacare, a large, complex piece of legislation passed.
It is to be phased in and will not take full effect until 2014. Lawsuits have been filed by several states, challenging its constitutionality. Republicans in the House of Representatives and the Senate have vowed to repeal it.
All it takes to block funding for it is 41 votes in the Senate. Funding also has no chance of passing the House as long as the Republicans continue to control it.
The Bush tax cuts are also a bone of contention between the two parties. The Republicans favor making them permanent, but President Obama and many Democrats in the House and Senate favor ending them for people making over $250,000.
Another reason some people fear tax increases are coming are the large deficits the federal government has been running since the financial crisis and recession hit in 2008.
I have heard this uncertainty of costs explanation from more than one local official, some of them Democrats, involved in economic development.
A second explanation that has been offered is that companies do not believe they can sell more goods and services than they do already.
In addition to the unemployment problem, which creates a vicious circle, many households took on excessive debt over the past decade or decades.
They are now trying to pay down this debt, which means they have less money to spend.
Even households that did not take on excessive debt in the past are cautious about spending money.
Banks and other lenders are also much more cautious in extending credit than they were in the past.
A third explanation is a more long-term problem than the current recession.
In the past two decades, the U.S. has lost more than six million manufacturing jobs to China.
Had we not lost those jobs, the unemployment rate would be 4 percentage points lower.
The Chinese engage in a variety of trade practices that keep U.S. goods out of their country and that make their goods cheaper than they should be.
One such practice is that their currency is not traded on a free market. Instead, its value is set by the government.
Various U.S. officials and private economists think that its value is artificially low, which makes its goods cheaper and ours more expensive than they otherwise would be.