HELP NEEDED FOR THE ECONOMY / THE NEW YORK TIMES EDITORIAL ( A MUST READ )

July 2, 2010

Help Needed for the Economy

If the economy were a coal mine, the job market would be an 800-pound canary, warning of a recovery that is running out of oxygen.

The economy shed 125,000 jobs in June. A loss of 225,000 government Census jobs overwhelmed a gain of 83,000 jobs in the private sector. The Census layoffs were expected, but the private sector additions were lower than anticipated, and far less than needed to keep pace with new workers joining the labor force. Adding to the slack, employers cut hours in June, reversing a boost recorded in May, while temporary hiring, an important harbinger of full-time job growth, slowed markedly.

Even a drop in the unemployment rate, from 9.7 percent in May to 9.5 percent in June, represents a pullback, not an improvement. The rate fell because 652,000 people left the work force last month. Since they were neither working nor looking for work, they were not counted as unemployed. If they had been counted, the jobless rate in June would have been 9.9 percent.

Worse, the uncounted, often referred to as “missing workers,” are not the only ones on the sidelines. In June, nearly half of the 14.6 million unemployed workers had been out of work for more than six months, with the average spell of unemployment rising from 34.4 weeks in May to a record 35.2 weeks. Swollen ranks of missing and chronically jobless workers are the human equivalent of idled factories — a waste of resources, a diminution of wealth, and a sign of despair.

And the despair is not confined to the labor force. An array of recent indicators shows that there is no way to turn a nascent recovery into a self-sustaining expansion without plentiful good jobs. Stocks fell every day last week, as investors anticipated and then confronted the worse-than-expected jobs report. In May, factory orders for manufactured goods hit their lowest point in over a year. Home sales in May were abysmal, and retail sales fell for the first time since last fall; auto sales in June declined. Perhaps most ominous, budget cuts at the state and local level are expected to result in mass layoffs in the next year or so; in June, state and local governments cut 10,000 jobs.

For all that, the biggest obstacle to recovery is not economic, it is political. The economy is limping badly as the federal stimulus and other government support are removed, obviously before the private sector is able to take up the slack. But Congress has failed to provide even the most basic support — extended unemployment benefits and bolstered aid to states.

Instead, Republicans and several Democrats have made the argument that cutting the deficit is more important than spurring the economy. The argument is wrong — jobs and the resulting tax revenue are crucial to repairing the budget. But the Democratic leadership in Congress and the White House has been incapable or unwilling to successfully rebut the deficit-mongers.

The economy has come a long way since the darkest days of the financial crisis, nearly two years ago, but it is still weak. The question now is whether it will move backward or forward.