Keith Hall is a senior research fellow at the Mercatus Center at George Mason University, and former commissioner of the Bureau of Labor Statistics.
By now, most Americans know that the past few years have seen the weakest economic recovery in our history. What most Americans don't know is that in order to bring unemployment down to the levels where it was before the recession, we'd need to create 325,000 jobs every month for the next four years—an unprecedented feat.
After a second quarter scare when the labor market and GDP growth dropped off sharply as the presidential campaign shifted into high gear, we've now seen monthly job growth of about 170,000 over the past four months. Since unemployment peaked in late 2009, the economy has added an average of 130,000 jobs per month, just enough to keep up with the growth of the population. Since 2007, the United States economy has shed 4.2 million jobs. Meanwhile, our population has gone up by 12.5 million—10.5 million of whom are working age.
Ordinary unemployment figures dramatically understate the severity of the situation because many Americans are merely underemployed, or are not employed and no longer actively looking for jobs. The numbers don't show them. A better measure of employment is the employment ratio — the share of the working population that has a job. According to the Bureau of Labor Statistics, the employment ratio bottomed out in late 2009, when only 58.2 percent of working age Americans had jobs. Today, three years into the recovery, that number remains very low at 58.8 percent.
If the same percentage of Americans had jobs now as before the recession, another 10 million people would be employed. If all of these jobless were counted in the unemployment rate, it would be 11 percent. And high unemployment has had an impact even on those who've managed to keep their jobs, with average hourly wage growth at an all-time low over the past year.
According to last Friday's jobs numbers, wage growth over the past year was below 1 percent for the first time ever—well below the current rate of inflation. That number normally stands at over 3 percent a year, and in good times, it's been as high as 4 percent.
The problem isn't that Americans lack job training to make themselves competitive in the global marketplace, and it isn't that a struggling housing market is preventing them from moving to where the jobs are. It's that the economy isn't growing fast enough to create the jobs they need. Since the recession began, only one demographic group hasn't seen an historic drop in its employment rates: Americans 55 and older, in large part because their retirement savings have tanked and they've had to go back to work. This has naturally had an impact on workers with less experience, whom they outrank and displace from the job force, perpetuating underemployment.
So what do you say about this if you're running for president? If you're Barack Obama, you should admit that things are bad, but claim you're handling them better than anyone else could. If you're Mitt Romney, you just point to the numbers. While Americans have seen an historic loss of wealth from this recession, it's clear that a great deal of economic policy uncertainty is helping to hold back economic growth. Whoever sits in the Oval Office in January, his work starts with restoring public confidence in the economy and showing real leadership in working with Congress.
The winning candidate will need to convince Americans that he has a credible plan for dealing with the staggering federal deficit, and lead us to consensus on the thorny questions of taxes and spending. Would a President Romney draw on a bipartisan panel like the Simpson-Bowles team to bring simplicity to the tax code? Would he do what it takes to lead, even if it meant raising government revenue through higher taxes? Would President Obama work with conservatives in a second term, cutting needless spending and regulation? Would he tack right when the situation requires, so people can be confident the country is getting back on its feet?
These are bad times, and not even the president is powerful enough to change them. But right now, he'd better do everything in his power to try.