This week from the think tanks, the narrative was that of an economy under stress, and attempting to recover from the greatest economic downturn since the Great Depression. The report this month from the Bureau of Labor Statistics shows that while employment remained steady at 9.5% the private sector added only 71,000 jobs. While the employment rate is holding steady, the labor market is shrinking as more and more workers drop out of the labor force because they have been unable to find employment. What we can see from the latest reports is that while the government stimulus prevented the economy from falling into a second Great Depression, and according to a report from two leading economists without the stimulus the GDP in 2010 would be about 11.5% lower, and payroll employment would be less by some 8½ million jobs. However, despite this it is clear that the economy needs more economic stimulus and jobs programs to prevent the Great Recession to turn into the Great Depression.
More Tank Think Below the Fold...
According to a report from the Economic Policy Institute:
"The primary reason the unemployment rate did not rise in July is that the labor force officially shrank by 181,000 workers. Those that dropped out of labor force were prime-age workers, while the number of young workers and older workers increased. The teen (age 16-19) labor force increased by 70,000, the young adult (age 20-24) labor force increased by 17,000, the prime-age (age 25-54) labor force decreased by 325,000, and older workers (age 55+) increased by 46,000. If the 181,000 workers that made up the decline had instead remained in the labor force and were counted among the unemployed, the unemployment rate in July would have been 9.6%. This points to another ongoing issue in the labor market, the backlog of "missing workers," that is, workers who dropped out of (or never entered) the labor force during the downturn. In the last three months, the labor force has declined by 1.2 million workers, reversing much of the 1.7 million increase in the labor force in the first four months of the year. This clearly shows how the forward momentum from earlier this year has largely evaporated."
According to a report from the Center for American Progress:
"Slow job gains and lackluster wage growth combined will limit the strength of the economic recovery moving forward. Unemployment remained at 9.5 percent in July, and over the last quarter the annualized rate of wage growth for production and nonsupervisory employees was 2.1 percent, above the annual rate of inflation of 1.1 percent as measured by the Consumer Price Index, Lackluster hiring and slow wage growth create a chicken-and-egg story: The typical U.S. family earning less than $100,000 per year derives 80 percent of their income from employment. Without a robust recovery in employment and earnings, families will be constrained in their spending, especially since due to lower home values most of us can no longer use our homes as ATMs. There appears to be little pressure building in the private sector for strong growth in future hiring. After sharply rising in late 2009, the hiring of temporary help slowed considerably early in 2010 and has been essentially flat for two months now. Average hours of production and nonsupervisory employees rose from 33.4 in June to 33.5 in July, which is where they were in May. While rising hours is encouraging, the level remains about where it was in late 2008."
According to a report from the Center on Budget and Policy Priorities:
"Although job losses have bottomed out, the huge jobs losses since the recession began in December of 2007 have left nonfarm payroll employment almost 7 percent (7.7 million jobs) lower in July 2010 than it was then. The jobs deficit from this recession is much larger than those in previous recessions. The economy would have to create an average of over 300,000 jobs a month for two years just to return to the December 2007 level of employment — and even more to restore full employment, since the population and potential labor force are now larger. Most forecasters expect the economy to grow much more slowly than that, especially as the stimulus from the American Recovery and Reinvestment Act (ARRA) winds down."
Takeaways
Economic Policy Institute
"With a deficit of 10.9 million jobs--a 9.5% unemployment rate--the private sector is not yet able to provide a robust recovery, and it is time for the government to do substantially more to create jobs so the backlog of unemployed workers in this country can have a desperately needed chance to get back to work."
Center for American Progress:
"With much of the employment data beginning to take an "L" shape—not getting worse but also not necessarily improving—there continues to be an important role for policymakers to spur the economy. The state aid package that passed the Senate this week is an important step forward, but Congress should consider additional steps to get people back to work, such as passing the small business bill now stalled in the Senate because of conservative filibuster threats, direct job creation, and ramping up our national service programs."
Political and Social Thought...
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