In the most recent unemployment numbers, it was reported that approximately 467,000 jobs were lost in June, totaling to 7.2 million people since the start of the recession. The job losses now equal the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous upward cycle.
There are a number of reasons we are in more trouble than the 9.5% unemployment rate indicates. For starters, at least 1.4 million people who wanted or were available for work were not counted since they didnâ€™t search for work in the four weeks preceding the survey. Also, more companies are asking employees to take unpaid leave and they werenâ€™t included in the unemployment roll.
Many workers are taking part-time jobs since they arenâ€™t able to find anything else. These underemployed employees have doubled to about nine million, or 5.8% of the work force. Adding these people to the unemployment numbers would cause the unemployment rate to rise to 16.5%. Furthermore, the average work week for rank-and-file employees in the private sector, roughly 80% of the work force, has slipped to 33 hours which is the lowest level since the government began tracking the data 45 years ago.
The outlook for job creation is equally concerning. Even when economic activity picks up, employers will first increase the hours of existing workers and bring part-time workers back to full time before hiring new employees. The millions of unemployed workers that will be looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are nearly impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have had to shut down whole business units.
After passing the unprecedented $787 billion stimulus package and lending out billions more, how is it possible that we are still in a dire situation? Much of the problem is that too much of the money went to transfer payments such as Medicaid, jobless benefits and similar programs that do nothing for jobs and growth. The spending that creates new jobs is new spending, which amounts to less than 10% of the stimulus package!
Next year state budgets will no long have initial rescue dollars. Without another rescue plan, they will be forced to make decisions that will slash spending, raise taxes, or both. According to the Center on Budget and Policy Priorities, state and local governments are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010 and a gap of $350 billion in fiscal 2011.
So should we hope for a second-act stimulus and if so what kind? Something that would have a real multiplier effect, not a congressional wish list of pet programs. It is more crucial than ever before that our government does not play politics with the issue. The time for serious intervention is now. It’s an embarrassment Washington didn’t get it right the first time.
Source: The Wall Street Journal