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Jobs matter

Until unemployment drops recovery is a long way away

Issue: "Flame-outs," May 8, 2010

For those of us who lack the advanced degrees necessary to assess the economy-are we in turnaround mode or set for more downturn?-here's a simple thing to watch for: where economists or pundits of left and right agree.

So take jobs. The news that the U.S. economy added 162,000 jobs in March-the first such gain in three years-was hailed by some as a sign of turnaround. Skeptics were quick to point out that one-third of the new jobs were temporary hires for census. And that 24 states had unemployment rate increases-­suggesting a persistent pattern of joblessness that engulfs nearly half our country.

But experts across the spectrum agreed: Long-term unemployment-people out of work more than six months-is the worst it's been in memory and not budging.

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"What's likely to slow the jobs recovery most," writes former Clinton labor secretary Robert Reich, "is the indubitable reality that many of the jobs that have been lost will never return."

And from the right, The Wall Street Journal's Daniel Henninger: "Unemployment today doesn't look like any unemployment in the recent American experience." He points to the "astonishing and dispiriting new reality" that the long-term jobless made up 44 percent of all unemployed in February-up from 24.6 percent in 2009. "Even when the recovery comes, some jobs will never return," he said, echoing Reich. So in addition to the tenacious numbers of new unemployment, we have a structural problem-creating new kinds of jobs to replace those that aren't coming back.

The U.S. economy has lost 8.4 million jobs since 2007. Using population growth figures (roughly 4 million Americans born every year since 1980), analysts estimate that 150,000 new jobs must be created every month to keep pace with new workers coming into the labor force. Overall we are now over 11 million jobs in the hole (jobs lost plus new jobs not created). With a sluggish recovery it's conceivable that it could take three, four, five, or six years simply to bring our employment picture back to its pre-2007 condition.

You begin to see why even Democratic-leaning economists and experts like Reich are pessimistic. They know better than to trust in rising auto sales or home construction rates. "Until businesses resume hiring in earnest and unemployment moves definitively lower, it is premature to conclude that a self-sustaining economic expansion is under way," chief economist Mark Zandi of Moody's Analytics warned the Senate Finance Committee in April.

And that's where common ground ends. The left is willing to increase deficits in order to extend jobless benefits, as Congress voted again to do on Tax Day, extending unemployment insurance by two months. It is willing to burden taxpayers (employer and employee alike) with new spending, a value added tax, ending capital gains exemptions, and pushing for the expansion of unions. Question: Do these steps create new jobs or take them away?

We are approaching parity with Europe. Overall government spending there makes up 44 percent of GDP; in the United States it is rising at 37 percent. The EU's overall unemployment rate for February stands at 10 percent (Latvia and Spain top the charts at 21.7 percent and 19 percent, respectively, while countries like Germany and the Netherlands are well below U.S. rates). What's strikingly different about Europe is its long-term jobless rate, which has hovered at about 60 percent for the last decade-a rate that signifies the perpetual wards of the state our long-term unemployed can become, not to mention the loss of business, private capital, and sheer drive. In this way the United States remains a standout: In 2008 the United States granted 92,000 new patents; the European Union, 59,000-and of those nearly 13,000 listed Americans as the first applicant.

Perhaps Americans should consider it an omen that in the very moment of becoming more like the Europeans, we have been reminded by an ash cloud that we remain an ocean apart-not subject this side of the Atlantic to a Eurocontrol. Englishman Francis Bacon saw in 17th-century America three things that make a nation's economy great: "fertile soil, busy workshops, and easy conveyance of men and goods from place to place." We can harness these again.
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