Politicians Who Ignore the Problem with Jobs May End Up Losing Theirs
While public debate about jobs usually focuses on the unemployment rate, what matters more are the changes in the number of people still working and how many hours they’re working, because that determines how much wealth and income the economy produces. On these matters, major developments are unfolding which could play decisive roles in determining not only the economic prospects of millions of households, but also the results of the 2010 and 2012 elections. As it now stands, Democrats in 2010 will have to explain why the jobs numbers are still deteriorating, and President Obama will likely go into his reelection campaign with fewer Americans working than when he took office.
What’s been happening with jobs already has broken past records. Since this recession began — the National Bureau of Economic Research pegs the start at December 2007 — the number of Americans employed has fallen by 6.5 million, or 4.7 percent. That’s far worse than the entire, deep 1981–82 recession, when the number of people at work fell by 2.8 million, or a little over 3 percent. The current jobs numbers also are in an entirely different league from those seen in the recessions of 1990–91 and 2001, when total employment fell by just a little more than 1 percent.
The number of Americans on the job will also continue to worsen even after this recession finally ends. After the 1990–91 recession, jobs didn’t begin to come back for 13 months — and it took four more years for manufacturing jobs to increase. The pattern was even worse after the 2001 downturn, when the number of Americans working kept on falling for two more years — and for nearly five more years for manufacturing jobs. All told, we may be looking at as many as 9 million fewer Americans working than before this all began. In addition, the number of hours worked by those who have jobs also is falling more sharply than it used to. During the big 1981–82 downturn, an American worker’s average number of hours shrank 1.7 percent, and the recessions of 1990–91 and 2001 produced declines in average hours of less than 1 percent. This time, average hours on the job are down 2.4 percent already — and it will get worse before this recession ends.
These developments are yet another reason why the next expansion, when it finally comes, will be relatively weak. The main element now available to prop up a coming expansion is the President’s stimulus, which was designed to kick in mainly this fall and winter. (The only way to get stimulus out more quickly is tax cuts; but the evidence showed that Bush’s spring 2008 tax relief had little effect on this cycle, because most of it was saved.) But the stimulus is a single-shot affair, and the emerging jobs picture suggests that it’s time to design a second one. It’s also time to take more seriously mounting evidence that globalization and other developments are taking big bites out of America’s long-vaunted capacity for creating jobs. We see this evidence throughout the last expansion (2002–07), when we added new jobs at a rate barely one-third as great as during the expansions of the 1980s and 1990s. Yet, there are few signs that these developments matter much in the current political debate. For example, a central factor in our new problems creating jobs, even during expansions, has been fast-rising health care costs being borne by businesses. With those businesses facing intense global competition, as most large U.S. businesses do, they’ve found themselves unable to pass along their higher health care costs through higher prices. So instead, they cut other costs, starting with jobs.
Even so, the health care reforms being considered by Congress all involve even higher health care costs for most businesses, which would mean more job cuts even as the economy grows. No one questions that health care reform is an urgent, national priority — as are efforts to contain the risks of climate change. But we gain little except a false sense of accomplishment by enacting health-care reforms that also aggravates the new jobs problem, or climate legislation such as Waxman-Markey which cannot deliver significant reductions in greenhouse gases.
The right way to do this is to focus first on the underlying problems in the current downturn and the issues with jobs and incomes — before we take on broad and urgent reforms in other areas. The politics, if nothing else, virtually dictate it, since a growing economy that creates large numbers of new jobs and pushes up incomes is always a prerequisite for the public’s support for reforms that, one way or another, end up imposing new costs on them.