Even without a double-dip recession, today’s unemployment numbers make it clear that the American economy is in for a long jobs depression. I don’t know how else to describe it. This is a situation we haven’t faced since the Great Depression, even if now joblessness is less severe and the nation as a whole is more affluent than in the 1930s.
The 83,000 private-sector jobs created in June are well below the 125,000 needed just to keep up with the organic growth of the labor force. Economic Policy Institute economist Heidi Shierholz called the report “a sobering snapshot,” noting that nearly 26 million Americans are either unemployed or underemployed (e.g., temps who want full-time work). Of the unemployed, 45.5 percent have been without a job for more than six months.
Other key data points: Average wages and the average workweek declined in June; workforce participation dropped; minorities, younger workers and those with lower levels of education are hardest hit. Despite some anecdotal evidence about the difficulties faced by older unemployed Americans, this age cohort has held onto its jobs fairly well.
“The labor force should have increased by around 3.5 million workers from December 2007 (the start of the recession) to June 2010, given working-age population growth over this period, but instead it decreased by 128,000,” according to Shierholz. “This means that the pool of ‘missing workers’ now numbers around 3.6 million, none of whom are reflected in the official unemployment count. As these workers enter or re-enter the labor force in search of work, this will contribute to keeping the unemployment rate high.”
The most optimistic scenarios wouldn’t refill the jobs lost by the Great Recession until the middle of the decade. And these were modeled on growth that now seems increasingly unlikely. Propelled partly by high unemployment, the economy is slowing. Deflation remains a serious threat.
Meanwhile, the federal government used its firepower to rescue the financial system. As many economists warned, the Obama stimulus was too small to fill the gap in lost output left by the recession, nor was it targeted to sustained jobs creation. Now “austerity” and the deficit are the big memes in the other Washington. It was politically impossible even to extend jobless benefits. The private sector isn’t hiring much.
So what does this mean? We face difficult years ahead, but the pain won’t be evenly spread. There will be an increasingly bitter gap between those who have work and those who don’t — especially those with no chance of regaining their former earnings power or even working again at all. This is politically explosive, particularly given how our political institutions are broken in a way not seen in the Depression. The safety net will increasingly collapse under the ongoing pain and calls to balance budgets.
The American economy has historically been very resilient. And for decades the Great American jobs machine was the envy of the world. Now something is very wrong, and it defies easy talk-radio ideological name calling.