Economic recovery requires jobs recovery

In an editorial Saturday The New York Times writes that until the economy begins creating jobs (it lost another 216,000 last month) hopes for a recovery will remain little more than hope:

...the only good thing to say about the August jobs report is that it could have been worse. Employers shed another 216,000 jobs last month, a smaller loss than expected and the lowest monthly loss total in a year.

The losses would have been worse had it not been for federal stimulus spending — proof that the government is indeed helping to ease the downturn in its role as the spender of last resort.

Still, the damage to the work force caused by the recession is deep, wide and ongoing. The economy is now coming up short by 9.4 million jobs, including 6.9 million positions that employers have eliminated and 2.5 million jobs that were needed to absorb new workers but were never created.

And unemployment is on the rise, jumping from 9.4 percent in July to 9.7 percent in August. For several demographic groups, the unemployment rate is already in double digits, including men (10.1 percent), Hispanics (13 percent), African-Americans (15.1 percent) and teenagers (25.5 percent). In all, 14.9 million workers are now jobless, of which fully one-third have been out of work for more than six months, the highest level of long-term unemployment by far in any post World War II recession. There are now nearly six workers available for every job opening, up from 1.7 workers per opening when the recession began in December 2007.

Worse, hiring is not expected to rebound anytime soon, even if overall economic growth resumes this year. Employers are likely to fill any additional workloads by adding hours to truncated workweeks and ending worker furloughs. Wage gains, which are always repressed when jobs are scarce and unemployment is high, will be an even longer time coming as employers restore pay cuts put in place during the recession before giving raises.

Without job growth and pay raises, consumer spending will not revive substantially because alternative sources of spending power — home equity and credit cards — are largely tapped out. And without an upsurge in spending, businesses will not add workers, and so on, in a decidedly unvirtuous cycle.

It has become commonplace to explain each dismal job report by saying that a resurgence in employment always lags general economic recovery. But with the job market severely wounded, and with consumer spending expected to be weak for a very long time, it could easily take until 2014 for employment to recover. It’s safe to say that five years or more of subpar job growth is not what most people have in mind when they think of a “lag.”

The question, then, is how bad does it have to get before the Obama administration and Congress make job creation a priority.

Will administration officials and lawmakers fight for new laws to make it easier to form unions, which are especially important in elevating and protecting the jobs of low-income workers? How will professed support for green jobs be translated into a manufacturing policy that promotes good jobs? Will efforts to improve the educational system also include serious efforts to train and retrain people for new jobs?

Help is wanted for out of work Americans.