The most significant aspect of January's jobs report is political. The fact that America's labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force.
President Obama's only chance for rebutting Republican claims that he's responsible for a bad economy is to point to a positive trend. Voters respond to economic trends as much as they respond to absolute levels of economic activity. Under ordinary circumstances January's unemployment rate of 8.3 percent would be terrible. But compared to September's 9.1 percent, it looks quite good. And the trend line -- 9 percent in October, 8.6 percent in November, 8.5 percent in December, and now 8.3 percent -- is enough to make Democrats gleeful.
But the U.S. labor market is far from healthy. America's job deficit is still mammoth. Our working-age population has grown by nearly 10 million since the recession officially began in December 2007 but many of these people never entered the workforce. Millions of others are still too discouraged to look for work.
The most direct way of measuring the jobs deficit is to look at the share of the working-age population in jobs. Before the recession, 63.3 percent of working-age Americans had jobs. That employment-to-population ratio reached a low last summer of 58.2 percent. Now it's 58.5 percent. That's better than it was, but not by much. The trend line here isn't quite as encouraging.
Given how many people have lost their jobs and how much larger the total working-age population is now, we've got a long road ahead. At January's rate of job gains -- 243,000 -- the nation wouldn't return to full employment for another seven years.
When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.
In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.
Yet deficit hawks continue to circle. State and local budgets are still being slashed. The federal government is scheduled to begin major spending cuts less than a year from now. Republicans are calling for more cuts in the short term. Austerity economics continues to gain traction.
Meanwhile Congress is debating whether to renew extended unemployment benefits. This should be a no-brainer. The long-term unemployed, who have been jobless for more than six months, comprise a growing share of the unemployed. (In January they rose from 42.5 percent to 42.9 percent).
Republicans say unemployment benefits are prolonging unemployment, that people won't get jobs if they get unemployment checks from the government. That's claptrap, especially when there's only 1 job opening for every 4 people who need a job. Republicans also say we can't afford to extend jobless benefits. Also untrue. Jobless workers spend whatever money they get, and their spending keeps other people in jobs.
Government should extend unemployment benefits, and not cut spending until the nation's rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.
The job situation is better than it was but it's still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
reduced Unemployment Rate to 8.3 % ( 1,423,000 reduction in Unemployment of which
85 % is from people dropping out of the Labor Force).
America is in deep trouble.
1. Remove pay roll tax.
2. Cut Corpoate tax to 10%.
3. Cut Capital gains tax to 10%.
4. Pull out of all foreign wars and cut the cost of healthcare to pay for it more college degrees.
The tax cuts will pay for themselves.
On top of that, what does your 4 mean? You say "cut the cost of healthcare", as if that is just a decision to make. Am I to take it by that statement, that you are a believer in single-payer healthcare, sort of like Canada?
http://www.flixya.com/blog/3201910/Beautiful-Butterflys
We need a real economic recovery plan, one that is focused on creating jobs and that plan is here at www.savingsocialsecurity.net. We need to embrace this plan. Please get your FREE copy of the plan, write your congressional representatives in support and tell all your friends to do the same.
I hope you are joking.
http://www.flixya.com/blog/3201910/Beautiful-Butterflys
But it's bad news for you because for the last 2 years you have wrote on a weekly basis how we will not have job increases without a second stimulus that is twice as large as the first one . . .
You were 100% wrong.
technology has reduced the need for human labor and will continue to do so... unemployment will rise over time and we had better decide what to do with our society. we will have permanent unemployment levels unthinkable in our present mindset...
If Obama had not been blocked the USA would look identical to Europe. No growth, high unemployment and loss of AAA ratings.
I dislike Republicans but they got it right. However it may lose them the election.
Politics is a crazy world I guess.
The Republicans have weakened this nation to unseat Obama.
The Republicans have lied to this nation to unseat Obama.
The Republicans have failed to negotiate in good faith to unseat Obama.
The Republicans have attacked the women in your life to unseat Obama.
The Republicans have denied Americans freedom to unseat Obama.
The Republicans have not created one job to unseat Obama.
The Republicans were elected to lead, create jobs and make America more secure for our children. They have failed spectacularly and now feel they deserve to be in the majority. What gall, what arrogance, what hubris, what a bunch of hypocrites. My entire life has been spurts of innovation and growth under Democrats and then years of undoing the progress we gained by the Republicans. I am so sick of going backwards.
Everyone that believes the economic growth is driven by consumption needs a lesson in economics. So here goes:
Picture people shipwrecked on an island. They managed to save some amount of food from the wreck but none of them know how to get more. They divide the food evenly between them. Unfortunately a couple people's food is flooded during the next storm. The authors theory of consumption driven growth would say the people that lost their savings, through no fault of their own, should be given jobs to earn their share of the limited remaining food supply and that it does not matter if these jobs are productive.
Clearly this does not make society richer.
The author would argue that someone on the island has the capability to produce food but is not doing so because there is no demand. Or to put it another way, there is no service that the people who's food supply was destroyed could do that would be valuable to the food producers. Make work will not solve this problem.
The work people do has to be valuable if the economy is going to grow and create more wealth. Drawing perpetual circles of ever expanding demand led growth is just magical thinking.
Your example assumes a limited amount of food with no way to increase the supply. In your example, everyone is doomed eventually when the food runs out. The people who lost their food in the storm will starve sooner or they will starve later, but they and all the rest of the people will, without question, starve.
However, if all of the people worked together and planted crops for the common good, everyone could survive the wreck. It would be in the best interest of the survivors to keep everyone alive so that everyone could do the work needed to grow the maximum amount of food. It would be up to the society to decide if those injured in the wreck and unable to work, or those too old to work, would be fed or allowed to die. A humane island society would feed them and an inhumane one wouldn't. In other words, the survivors would need to make tough moral decisions.
If you truly believe that the United States is at the point where we are just eating what is left after the wreck and then it's over, well, no wonder calls to stimulate the economy seem non-sensical to you.
I fully agree that everyone on the island should work to produce food and trade with each other for what they need. This allows specialization and avoids free riding problems. A society like this would be very humane while avoiding the free rider problem. And yes in the vast majority of cases people would share with those that are sick or injured and they would do so without Government force just as they would in our current society.
Calls to take money from some to "stimulate" the economy are nonsense and should be treated that way.
When do I start?