Employment prospects are closely tied to education. The educated segment of the population has seen employment expand 9 percent so far during this cycle, while the uneducated pool has suffered a 9 percent decline. Employment is shockingly low for those who did not finish high school or who graduated but did not go any further. The unemployment rate for youth is 16 percent and would be considerably higher if the 1.5 million young people who have dropped out of the labor force during this cycle were counted. Equally troubling, there has been a dramatic increase in part-time, low-wage employment.
Some 40 percent of the unemployed ranks have been out of work for more than six months – more than double the historical norm. These folks are becoming increasingly unemployable. Indeed, the only reason the unemployment numbers are looking better is because the labor participation rate has fallen by 2.4 percent since the recovery began in mid-2009. This is unprecedented. The largest decline is in the younger age cohort. Eleven million people who want to work but are simply not looking are not represented in the unemployed statistics.
We are in the 45th month of a so-called expansion. Typically, nonfarm payrolls would be rising by 285,000 per month, but we have only exceeded this number three times over the last 45 months.
The hallmark of this recovery is no follow-through. We have to go back to the summer of 2007 to find the last time we saw two quarters with 3 percent-plus growth in GDP.
The weakness of this recovery is reflected in the fact that, more than four years into it, none of the four major categories that define the contours of the business cycle have actually managed to recoup their recession losses. Production, manufacturing output, trade sales, total payrolls, full-time employment, real personal income and transfers, and real disposable income per capita are all down. This, too, is unprecedented, and takes place in the context of four years of the lowest policy interest rates ever and the tripling of the federal balance sheet through deficit spending, with four straight years of trillion-dollar deficits. These deficits, to a large degree, have been spent unproductively. Way too much of the stimulus package failed to create new jobs, except for government employees.
We need the domestic equivalent of the Marshall Plan that saved Europe after World War II. Three things we should do at once:
- Invest seriously in transportation. We did it in the early 20th century through the creation of a national transportation system by the integration of a national railroad network. We did it again in the '50s and '60s with the interstate highway system. This time, with so much of our traffic airborne, we need to have a major program to redo most of our shoddy airports and to enhance air traffic control systems.
- Improve the efficiency of the patent office so that it can be accelerated as a channel for innovation.
- Expand the number of H1B visas given to foreign graduate students in the hard sciences who wish to work in the U.S. We have a terrible shortage of people qualified at this level. Not only would they stimulate the high-tech world, but also they would stimulate other industries that generate lower-paid jobs.
Four years into the "recovery" it is unacceptable that the level of industrial output, employment and real incomes remains below prerecession peaks. We cannot be confused by the fact that we are in the midst of some kind of bull market in stocks, for that is mostly an expression of our ability to keep the U.S. Mint's printing presses humming to expand the money supply and keep interest rates dramatically – and unsustainably – low. The financial markets create the illusion of progress and a false hope. Hope is a good breakfast, but a poor supper.