The Jobs Deficit & The Breaking Point, Pt 1.

Like the college professor he is, Dr. Bernard Anderson, member of the National Urban League President's Council of Economic Advisors, came to this weeks "Putting America Back To Work" forum [1] with three points he wanted those gathered to take away with them.

1. The depth and breadth of the economic crisis has worsened, increasing racial disparities, and threatening to wipe out gains made towards reducing those disparities in the 1990s.
2. The unemployment crisis reflects a structural change in our economy. The link between job creation and economy growth has been weakened. Economic growth no longer results in job creation. Thus in recent recessions we have experienced the phenomenon of "jobless recovery." [2]
3. Direct public job creation is imperative to economic recovery.

All three points could serve as a starting point for discussion, and the relationships between them aren't hard to understand. But Dr. Anderson's second point stuck with me, as I left the forum on Tuesday, as the first point seemed to be a symptom of the second, and the third point was necessitated by the second:

The link between job creation has been weakened. Economic growth no longer results in job creation.

Except that I'd say the link between job creation and economic growth is near the breaking point, because in our economic bizarro world, economic growth is growing more closely linked to job reduction, as The Washington Independent's Annie Lowrey explained in two simple statistics [3]:

Wondering what’s behind those recent jobless recovery numbers?

1. Fortune 500 companies tripled their profits to $391 billion in 2009.

2. They also slashed their payrolls by more than 800,000 jobs.

It brings up a question, regarding Dr. Anderson's thesis: When the private sector is unable to create sufficient jobs, then the government must. Should the be amended to "When the private sector is unable or unwilling to create sufficient jobs..."

Despite suggestions that "jobless recovery" might now be a misnomer [4], due to slight rises in the number of jobs added (162,000 in March and 290,00 in April [5]). But, according to a report from the U.S. Conference of Mayors [6]— echoed by Dr. Anderson — the unemployment crisis won't even begin to abate for until 2013. That means that at the current rate, if we do nothing, the unemployment rate will stay at or above 10% through 2013. Of course, that's an abstract number. According to Paul Krugman [7], the new OECD Economic Outlook predicts that by the end of 2011, the unemployment rate will still be at 8.4%.  Another study [8], from economists at Rutgers, puts the elimination of the "jobs deficit" (a term I think should be used more often) as far off as 2017.

Erasing this deficit will require substantial and sustained employment growth. Even if the nation could add 2.15 million private-sector jobs per year starting in January 2010, it would need to maintain this pace for more than 7 straight years (7.63 years), or until August 2017, to eliminate the jobs deficit! This is approximately 50 percent greater than the length of the average post-World War II expansion (58 months).

To understand what it means on the community, familial, and individual level, you need to hear the stories of people who are facing job loss and loss of jobless benefits, with nowhere else to turn — people who have worked their whole lives [9], only to find themselves abandoned in an economy that doesn't care if their working or not. If the Fortune 500 is doing well, the economy is doing well — or well enough, at least — whether Americans are working or not. (That apparently goes for mid-level Wall Streeters, too. [10])

That's precisely because of the structural change in our economy [11] that Dr. Anderson was getting at, which is at the root of the current jobless recovery and the economic anxiety it's brought to many Americans.

This anxiety accurately reflects both the long- and short-term downward trajectory of work in America. As the U.S. economy has moved from a substantially unionized manufacturing base to a non-union service-sector workforce, working-class incomes have stagnated or declined. In the current downturn, those new college graduates able to find jobs often fail to find ones commensurate with their education. Northeastern University economist Andrew Sum calculates that only 51 percent of college graduates under 25 work in jobs that require a college degree, the New York Times reported on Tuesday.

Of course, no one at any point on the political spectrum has a complete prescription for what ails the American economy. But we do know how to preserve and create enough jobs to keep a recession from becoming a depression and, more particularly, how to keep still-reeling state and local governments from deepening the downturn by laying off thousands more workers. We did just that last year: The Obama stimulus Congress passed last winter saved or created what most economists estimate to be roughly 2 million jobs. For that matter, every major nation enacted a Keynesian stimulus last year, preventing a return to the agony of the 1930s.

We did it, as I mentioned before, in the 1970s.

And, with all due respect to president Obama, those who say "government can't create jobs [12]" are simply wrong. (Not to be flippant, but it created his job. The president is far to intelligent to start sounding like Michael Steele [13]. One wonders what motivated that statement.) There are times when government can and must create jobs. As panelist Dr. Bernard E. Anderson — economist, professor, and member of the National Urban League President's Council of Economic Advisors pointed out, "when the private sector is unable to create sufficient jobs, the government must."

Dr. Anderson also pointed out that we don't have to go back to the 1930s and the Depression for an example. The last time we had an effective government jobs program was in 1973, under a Republican president — Richard Nixon [14], who signed the Comprehensive Employment and Training Act [15] (CETA) into law. At its peak in 1977, created 725,000 jobs and by itself decreased the unemployment rate by 1%.

The president should not only take note of CETA, but also that even some of its critics say the problem with CETA was that it wasn't big enough [16].

Conservatives reading this brief history may feel justified in their scorn for government programs. But the problem with CETA was not that it embodied Big Government, but that it was not big enough. CETA left behind no lasting monuments like LaGuardia Airport and the Hoover Dam, no evocative art like the WPA murals in post offices and libraries. The administration of CETA was lax, but almost all of its scandals were small-bore local corruption.

Today, even more than in the 1970s, there is a moral argument for public service employment. While Barack Obama's stimulus package was advertised as shovel-ready, a public jobs program would be people-ready. The societal waste and the wrecked lives from double-digit unemployment will leave scars that may take decades to heal. But what liberals should have learned long ago from CETA is that effective management matters – and that an ill-designed program can turn a laudable idea into a laughing stock.

Of course, this is wrong. Government has and can create jobs — on the federal , state, and local level — if the political will is equality to the need. It's been done as recently as the 1970s, and under a Republican president. The problem is that unemployment numbers don't worry politicians like they used to. Now, the bottom lines of Fortune 500 companies are a greater indication of the country's economic health than the size of the workforce. 

(In fact, companies can improve their bottom lines even more when they layoff more workers, which is why they do so even when they're turning a profit — because it makes their profits even bigger.)

If the private sector is unable — or unwilling — to create sufficient jobs, at least enough to get unemployment back into single digits, then the government must, and is the only entity that can.

And as happened with CETA, the stimulus package, and is happening with current jobs legislation, Democrats were cowed by conservatives into "scaling back" (a phrase often heard in reference to every much needed reform this Congress and this president have attempted), jobs programs that their opposition then criticized for not doing enough (but were happy to get stimulus dollars for their constituents [17]).

Even as I write this, Democrats have caved to congressional conservatives and deficit hawks by "scaling back" the jobs bill currently before Congress [18].

Democrats have chopped more than 25 percen [19]t out of the jobs bill, which is actually an amalgam of economic relief measures. The objective: collect "moderate" votes from other Democrats needed to pass the legislation. There is no guarantee the cuts will achieve that objective, however.

Among other things, the revised bill would only extend unemployment benefits until November 30 instead of December 31, as first intended.

Much of this has to do with deficit hawks who, although wrong, at least have a reasonably consistent record for their stance, and the deficit peacocks who only worry about deficits when tax cuts for the rich and war spending aren't at issue.

This is after preparing to pass an additional $32 billion to pay for the war in Afghanistan, while struggling to pass a $23 billion to keep 300,000 teachers from being laid off, Leading Robert Borosage to ask:

What kind of country are we? In the worst economic recession in 70 years, competitive industrial nations must choose their priorities — what gets saved, what must be sacrificed. No sensible leadership would choose to make children — particularly the children of working and poor families — pay the cost of the downturn.

That's because we've shifted much of the economy to the goings on of Wall Street. We will let our people go without work. We will even cut off their unemployment benefits. We will subject our children to ever more crowded classrooms. Because we do not believe they are worthy of investment any more. Their well-being and the well-being of the economy have little to do with each other. The economy can do relatively well even if they do poorly.

But for how long? It is sustainable? Of course it's not. As the saying goes, a chain is only as strong as its weakest link. And if the link between job creation and economic growth has been weakened, as Dr. Anderson says, then right now it is stressed to the breaking point.

And if that link is broken?

Well, we won't have to worry about building a new economy, because we won't have anyone capable of building it or a workforce capable of sustaining it.