How to tackle America’s lost decade
Mort Zuckerman
December 5, 2011
News that the US unemployment rate has fallen 0.4 percentage points and that we have created 120,000 jobs is better tidings than of late, but we need to do much better: just to match population growth we need to create at least 150,000 jobs a month.
For hiring to occur at a pace that would support recovery, we would need at least 500,000 more hires per month. Instead, payrolls today are more than 7m shy of where they were when the Great Recession began.
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For American workers, these are the worst times since the depth of the Great Depression. The unemployment rate, the highest and most sustained in seven decades, improved last month primarily because more than 300,000 people left the labour force.
And the situation is even grimmer than suggested by the dismal statistics, calculated from a base of only 60,000 families. Analysts have concluded that the combined unemployment and under-employment rate is slightly above a staggering 20 per cent of the labour force.
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Worse, 40 per cent of the jobless have been out of work for six months or more, compared with 10 per cent in 2007. The average period of unemployment now exceeds 26 weeks, well above the previous peak in July 1983 of just 21.2 weeks. This is critical because the longer that people of any age are out of work, the less likely they are to find another job.
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Most of the activity in the labour market today reflects “churn”, the continual process of replacing workers, which is not the same as expansion. High churn generally means that workers are moving from declining sectors to better jobs in growing sectors that pay higher wages. That sounds good, but here is another dismaying trend. In previous recessions, around 1m more Americans every month moved to better jobs. This means that almost 35m Americans are trapped in jobs they would have left in better times.
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But what of the recent headlines suggesting job growth has recently improved? Again, there is no silver lining. The apparent improvements result primarily from the decline in the number of layoffs – down from 2.5m per month in February 2009 to 1.5m two years later – rather than from increased hiring.
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The Great Recession has shown employers they can do with fewer workers than before, aided by technology and by agencies that allow them to hire temps almost instantly – reducing the need to hire in anticipation of a pick-up in business. Companies know they need to come up with a newer business model to weather a long-term downturn. Predictably, a lot of jobs have also gone overseas.
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The outlook is bleak. Over 20 per cent of companies say that employment in their firms will never return to pre-recession levels.
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Another 40-plus per cent say revenues would have to rise around 40 per cent to return to pre-recession employment levels. Moreover, most of the new jobs available don’t match the pay, the hours or the benefits of the positions that vanished during the recession. Millions of Americans face a lost decade, living from paycheck to paycheck, struggling to pay their bills, having to borrow money and go deeper into debt.
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Who, among the contenders for the White House, has a remedy for this catastrophe? Clearly, this dysfunctional Congress offers no hope until after 2012. Yet we must reverse the decline in American education that has left workers less able to compete in the new world. Skills, not muscle, are the only reliable path to high-wage jobs, in an era when technology and globalisation allow companies to make new investments in regions where labour is cheap.
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We also need to approve many more H1B visas to permit highly educated science graduates to take work in engineering and technology. Contrary to popular perception of immigrants, these are people who would create jobs rather than take them. And we should rationalise the stumbling process of certifying patents in order to unleash thousands of start-ups, the single greatest source of new employment.
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Greater certainty over policy would also help the economy. A metric devised by economists at Stanford University and the University of Chicago shows that policy uncertainty accounts for about 2.5m jobs lost. They assert there is a widespread view in business that the healthcare bill makes it burdensome to hire, underscoring how political uncertainty has made it more difficult to plan ahead. The National Federation of Independent Business asked small businesses their biggest problem. Sixteen per cent of small businesses cited “government requirements and red tape”.
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Finally we need to invest in a national infrastructure bank. We ought to undertake new projects of the kind that built America. But we are not even keeping up with repairs – which will cost much more when our bridges, roads, dams, schools and sewage systems collapse. We look askance at the Europeans, but Washington is a graveyard of American dreams.
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