This December will mark the fifth anniversary of the official beginning of the recession, and the U.S. economy is exhibiting no positive momentum.
According to the National Bureau of Economic Research’s official Business Cycle Dating Committee, the recession ended in June 2009. Yet three years later, the official unemployment rate is 8.2 percent, comprising 12.7 million Americans, and
Moreover, the unemployment and underemployment problem is far worse than these widely reported figures suggest. More than 20 million Americans who are actively looking for work are unable to find full-time employment. Millions more have lost hope and given up seeking employment at all — they are not even factored into the official unemployment rate. If they were to be counted, the unemployment rate would stand at about 14.9 percent.
Last Friday, July 6, the Bureau of Labor Statistics’s Monthly Employment Situation report revealed that the U.S. economy generated only 80,000 net new jobs in June, falling 150,000 jobs short for the third month in a row of even keeping up with population growth.
Layoffs are occurring less now than at the height of the recession. Unfortunately, job creation is occurring less, too. Each month, nearly one million fewer jobs are being created than when the recession began in December 2007. That has been the under-reported story of this awful economy. If you look back at what is considered a much less severe downturn — the 2001-03 recession — job loss was actually worse through the first seven quarters of that downturn than during the current recession. In fact, 3.1 million more jobs had been lost at that point than in this recession (through its official end in June 2009). The depth of our current unemployment problem is revealed by the fact that 8.6 million fewer new jobs were created this time around than during the first seven quarters of the 2001-03 recession. There have not been nearly enough jobs created in the past four years to absorb the influx of new workers, let alone provide opportunities for those who have been laid off.
Given my abiding faith in the long-term future of our nation, at this point in a column I typically cite some positive economic indicators. There have been months that looked like the economy could be gaining some positive traction, but then the momentum fades — most infamously after President Obama’s healthcare bill was enacted in the spring of 2010. Afterward, the White House’s vaunted “Summer of Recovery” turned into a debacle during which there was a net loss of more than a quarter-million jobs. With the Supreme Court this summer opting not to strike down the healthcare reform law’s panoply of private sector mandates and taxes, no one should be betting on a fall or winter of recovery, either.
Today there is a pervasive sense that what lurks around the corner is recession. One would be hard-pressed to locate economic indicators that suggest otherwise: the service sector of the economy is barely expanding, the manufacturing sector appears to be contracting for the first time since 2009, and consumer confidence is down for the fourth straight month.
Because the economic situation is so bad, the Federal Reserve is considering another round of “quantitative easing” — a monetary policy of injecting more debt-fueled money into the economy. Many economists fear this could ignite other problems, including inflation.
With the private sector under severe duress and payroll costs increasing due to government mandates, the outlook for new job creation is very grim if we stay on our current path. That will be sadly evident if Congress and the president do not act quickly to head off the gigantic tax increases that loom over the economy because the 2001 and 2003 tax reforms are once again set to expire at the end of this year.
And while the tax code strangles job creation, the federal regulatory system is an even worse job-destroyer. Every year it costs the private sector $1.75 trillion.
America needs a new approach to boost the economy — one that does not doom future generations to being saddled with paying off today’s federal deficits. 2012 will be the fourth consecutive year of federal deficits exceeding a trillion dollars. There should be an immediate moratorium on federal regulations that endanger jobs. We need long-term tax reform that promotes private sector job creation. And legislated mandates that kill jobs by raising the cost of payrolls need to be eliminated.
Policymakers, elected and unelected, need to be ever-mindful that the U.S. economy does not exist in isolation. In this increasingly competitive worldwide economy, no nation will prosper with a government hostile to private sector job creation.
Chao is former U.S. secretary of Labor (2001-2009) and currently distinguished fellow at The Heritage Foundation.