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America's Job No. 1: A better employment rate

A selection of solutions for a better employment rate: From cutting taxes to raising taxes, job sharing to job training.

By / Staff Writer / October 16, 2010

Neal Young (r.) manager of Labor Ready, an employment agency in Culver City, Calif., issues a job applicant a hard hat, work gloves, and safety vest with a referral ticket for a day's work at a construction site.

Reed Saxon/AP


The 9.6 percent unemployment rate is Issue No. 1 for voters heading into the congressional elections next month. America has about 7.8 fewer million jobs than it did in 2007. To put it more starkly: Total employment has fallen to 1999 levels, even though today's workforce is much larger.

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In poll after poll, Americans say the economy and job creation are the nation's most urgent priorities.

Here are some answers to questions about how to do that, what policies could be tried, and what the stakes are.

If the recession ended in June 2009, why is unemployment still so high?

Two factors may be playing a large role: high household debt and a shift in the way many employers think about hiring.

In decades past, recovery after a deep recession was often fairly rapid as consumers revived and employers rehired. After the 1981-82 recession, the number of jobs lost during the slump was regained in just a year.

What's different today is that the recession was rooted in a severe credit crisis. (In 1981, by contrast, a major factor was tight money policy.) Millions of consumers have high mortgage debt and have seen a plunge in the value of homes and investment portfolios. So consumers are spending less, while defaults on debt make banks less able to lend.

In such a climate, economic rebounds are typically slow. Because consumer expenditures are the fuel for the nation's economic engine – accounting for two-thirds of gross domestic product (GDP) – tepid demand makes employers cautious about hiring. Plus, the decision to add a worker is a bigger deal than it used to be. One reason: Health-care costs are rising faster than inflation, and the weak economy makes it harder for firms to cover those costs by raising product prices. Another factor: It has become easier to outsource jobs overseas in recent years.

Finally, as economist Arnold Kling argues, creating a job is an act of investment that often pays off only after a long wait. Forget the factory-floor model, in which demand picks up and workers are hired for a new shift. Given the growing automation of routine production work, new jobs often stem from corporate efforts to develop some new product, market, or capability.

Mr. Kling argues in a recent publication by the conservative American Enterprise Institute that, in jobs such as lab research or social-media marketing, "the return on an investment in workers may take as long ... to realize as the return on investment in a machine."

Whether for these or other reasons, the United States has a deep jobs hole to fill.

"What we need is millions of jobs in new industries which are highly paid, which are highly differentiated" from global competitors, says Robert Ackerman, a venture capitalist in California.

How does current unemployment compare with past cycles in the US, and those of the rest of the world?