A crisis management plan for the American jobs emergency
At the current rate, unemployment won't return to its pre-recession level for more than a decade, if ever. We need a new WPA and a National Infrastructure Bank.
This is not a recovery. It’s a continuing jobs emergency and it demands action.Skip to next paragraph
Robert is chancellor’s professor of public policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Clinton. Time Magazine named him one of the 10 most effective cabinet secretaries of the last century. He has written 13 books, including “The Work of Nations,” his latest best-seller “Aftershock: The Next Economy and America’s Future," and a new e-book, “Beyond Outrage.” He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
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We learned this morning that unemployment rose to 9.8 percent in November and employers added only 39,000 jobs. Private employers added 50,000 — the smallest gain since January. Government employment continued to shrink.
We’re heading in the wrong direction. In October, the jobless rate was 9.6 percent, and employers added 172,000 jobs. Private-sector job growth totaled 160,000.
At this rate unemployment won’t return to its pre-recession level for more than a decade, if ever.
Over 15 million Americans were jobless in November. This doesn’t include those who are working part-time but would prefer to work full time. Nor does it include a record 1.3 million who are too discouraged even to look for work.
Nor does it take account of the fact that most families are dependent on two breadwinners. So to figure out the true impact on most families, all these numbers have to be doubled.
Nor does it reflect the fact that the level of unemployment tracks level of education. Only 5 percent of those with college degrees are now unemployed, while more than 20 percent of everyone else is without work.
Maybe that’s why Washington doesn’t get it. The Washington echo chamber is filled with college degrees.
But the Average Worker economy on Main Street continues to wallow.
Let’s be clear about this. The problem is lack of sufficient demand for workers.
There are only four sources of demand. The biggest source is American consumers, who comprise about 70 percent of economic activity.
But the vast American middle and working class can’t and won’t buy enough to get people back to work. They’re still under a huge debt load.
Even if and when they pay it off, their buying days are gone. The Great Recession took away their last means of coping with years of stagnant wages — going deeper into debt by using their homes as collateral. The housing bubble burst, and home prices continue to drop.
The second source of domestic demand is business. But businesses won’t hire more workers without more customers.
(Republican supply-siders say businesses are not hiring because they’re uncertain about the effects of the new health care law and don’t know how much taxes they’ll have to pay. This is political claptrap. Supply-siders also say businesses would start hiring if their taxes were lower. But businesses are sitting on almost a trillion dollars of cash. They don’t need lower taxes in order to hire more Americans. They need more American customers.)
The third source of domestic demand is net exports. But they’re going nowhere. Although China, India, and Brazil are buying goods and services from American companies — and thereby boosting US profits — those US companies are making most of what they sell there in those countries. GM is selling more cars in China than in the US now, and manufacturing them in China.
That leaves the fourth source of domestic demand — government. But it’s not nearly filling the gap. To the contrary, state and local governments are broke, and are cutting spending and raising taxes to the tune of over $110 billion this year. The federal government’s much-maligned stimulus is about gone (almost all economists believe it saved over 3 million jobs).
The Fed is pumping $600 billion into the economy, but without an expansive fiscal policy this is only fueling speculation.