Jobs report finds little overall progress. Why is recovery so slow?
Jobs report says the unemployment rate was 7.8 percent in December – the same as for November. Employment growth is notably slower than in past recoveries from recession.
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Today, some 42 months after the official end of the recession, employment growth is below 3 percent. And after the 2001 recession, job gains hadn't even reached 2 percent after 42 months.Skip to next paragraph
So, by that gauge, this is the worst performance other than the period after 2001. And in some ways, the current recovery lags behind even that post-2001 period. Today, total US employment is still about 3 percent below the peak it hit as the recession began. By this time after the 2001 recession, jobs lagged behind their earlier peak by about half that much.
Now for the why.
The biggest and most obvious answer has to do with debt. Recoveries after a financial crisis, when a nation is struggling with high debt burdens, tend to be protracted, many economists say. That shows up in various areas of the economy. Debt-strapped consumers boost their spending at a slower pace. Home construction doesn't rebound the way it normally would, thanks to the aftereffects of the housing bust. Federal and state governments are looking at lean tax revenues and aren't hiring.
Even foreign trade is affected, since the debt crisis is to some extent global. And all of the above affects the confidence of business to make new investments.
The housing market has begun to recover, and US consumers have been making progress in lightening the burden of debt. Many mortgage borrowers have already been foreclosed upon. Other families have avoided taking on new debts. But the process of "deleveraging" is still under way.
But a debt overhang may not be the whole story. After all, the other two recoveries since 1990 have also been characterized by disappointingly slow job growth.
Economists are exploring possible explanations, including:
• The long-term trend of eliminating middle-wage, middle-skill jobs through automation. This is a gradual process, but its effects may show up prominently in the wake of recessions.
• Decline in US competitiveness. Job growth would be stronger if the nation were better maintaining the strength of US manufacturers against global rivals, argue some analysts including the Information Technology and Innovation Foundation in Washington.
• A downshift in demand for jobs. The idea here is that job growth is partly a function of how many people want to work, and in the United States, the "participation rate" in the labor force has been falling since about 2001. A key question is how much of this is due to discouragement, as people who fail to find jobs stop looking, and how much is caused by other factors.
With the aging of baby boomers, a large chunk of adults is migrating above age 60 and becoming less attached to the job market, some economists note. Meanwhile, some younger groups such as teens and middle-aged men also show long-term declines in labor-force participation.
At the same time, many economists think the participation rate would climb from its current lows if the climate for jobs and wages improved.
About 1 million people are currently not in the labor force because they're "discouraged," according to Labor Department surveys. By comparison, some 12.2 million are officially counted as unemployed because they lack jobs and are actively looking.
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