Morning Must Reads - Weekend Edition: Bleak Employment Outlook

More or less in line with the consensus forecast, the U.S. Labor Department reported Friday morning that U.S. nonfarm payrolls grew in October by 80,000 and the unemployment rate fell slightly to 9%. This news comes a week after the Commerce Department reported that Gross Domestic Product (GPD) grew 2.5% in the third quarter of this year.

Both reports represent a relative improvement over previous trends, but as Dean Baker of the Center for Economic Policy Research (CEPR) notes:

At this pace it would take more than 33 years to return to the pre-recession rates of unemployment.

The figure below by Josh Bivens of the Economic Policy Institute plots the contraction in GDP during the Great Recession compared to the 1990 and 2001 recessions and the pace of growth in the recoveries that followed.  As you can see in the figure, the pace of growth in this recovery does lag somewhat the two previous recoveries. But as Dean's startling estimate reveals, the larger problem is how deep the recession was.

Increasingly the business lobby is trying to use the current high level of unemployment as a lever to push their self-serving political agenda, advocating for a bizarre range of policies from advocating for more pollution to the use of more child labor, so the following from Bivens is an excellent counter-point: is clear that what really explains why so many more workers and so much more capital remains idle today compared to recoveries past is just how ferocious the preceding recession was.

Does this leave today’s policymakers off the hook?

No – they should do more.

The past is the past and just because a problem is inherited doesn’t mean it shouldn’t or can’t be solved...

And clearly there is more we can do now to boost the sluggish demand growth that is the main cause of today’s economy operating below potential.

But, it is worth remembering where the problem came from.

As we get further and further from the Great Recession, the temptation is great to act as if citing it as the root cause of today’s problems is just unseemly dwelling on the past and dodging blame.

But, really, it does matter how it all started.

And it is best not to forget, although the Recovery Act was too small to return us to full employment, it did slow the pace of job loss (the figure below is data for Pennsylvania).  

In fact, a key reason the Pennsylvania economy is expected to shrink through the first quarter of 2012 is the end of aid to state and local governments included in the Recovery Act which has started a wave of public-sector job losses here in Pennsylvania.


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