The Bleeding Has Stopped but the Job Market Is Not Recovering

The Bleeding Has Stopped but the Job Market Is Not Recovering

-Christopher Carroll

The most recent jobs report is further proof that the economic recovery is anemic. Not only is this not likely to change any time soon but if Washington fiscal policy continues, the “recovery” may never be realized. The United States may have to grow accustomed to middling growth and high unemployment rates.

The Department of Labor reported that the economy added jobs in July, cutting the 7.6 percent unemployment rate to 7.4.  However, this was lower than many expected and has given many people pause.

The seal of the United States Department of Labor (Photo credit: Wikipedia)

Jackie Calmes and Catherine Rampell of the New York Times have pointed out that the number of federal workers forced to take unpaid time off has “soared this summer — to 199,000 in July, from 55,000 a year earlier.” This is directly attributable to the sequester, an attempt by Washington bureaucrats to rain in the national deficit by curtailing military and domestic spending.

This problem has not only been seen in the federal workforce. Nationally, the number of people working part-time involuntarily due to cut back hours, furloughs or an inability to find full-time employment was unchanged in July, remaining very high at 8.2 million people. Additionally, the number of long-term unemployed people remained at 4.2 million, roughly 37 percent of the overall unemployed.

The toll the sequester is taking on the economy is now widely recognized as a crippling hindrance on economic growth. Justin Wolfers, an economic professor at the Gerald R. Ford School of Public Policy, described the incompatibility gap between the economy’s needs and Washington policy as being “larger than any I’ve seen in my lifetime,” adding that “this is not the right time for fiscal retrenchment.”

The jobs report and overall economic trends certainly support professor Wolfer’s claim. While the unemployment rate has dropped consistently in the United States and the economy has slowly but consistently added jobs over the past year (0.8 percent and 1.2 million jobs), the employment rate has remained unchanged.

This has meant that because people are dropping out of the “actively seeking a job” category and are therefore excluded from consideration, the falling unemployment rate is deceiving. Not only are we adding mostly part-time and poorly paid jobs to the economy, but we are adding people to the jobs market at the same rate that we are adding jobs. The result: an artificially low unemployment rate and an essentially flat-lined employment rate.

Adults are taking the brunt of the poor job market. Before the recession, just over 63 percent were employed. Post-recession, just 58.7 percent of adults are employed (see graphs). As noted by Binyamin Appelbaum of the Times, this is partially because the United States is getting older. This may be the new normal. The American economy may never see substantial increases in the employment rate. So long as Washington continues to enact policies that damage growth and discourage job creation, the number of jobs added will continue to fail to stay in front of the number of people added to the market. Sequestration is hurting the economy, debates about raising the national debt limit terrify the markets and employers are left to guess when Ben Bernanke and the Federal Reserve will enact quantitative easing.

These numbers seem to suggest that economic recovery is just a myth. Rather than improving, the economy seems to have only stopped the bleeding. For now, Congress is at home for a month long recess. Millions of Americans are at home too.