The Great Recession, as it is now commonly called, is the longest and worst recession since the end of WWII. It is also marked by the weakest recovery from any recession that we have had in that same period. In June, the government's Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000 - but there are "jobs" and then there are jobs. No fewer than 557,000 of these jobs were only part-time. The Survey also reported that in the month of June, full-time jobs declined by 240,000, while part-time jobs soared by 360,000 and have now reached an all-time high of 28,059,000, three million more than when the recession began at the end of 2007. By contrast, the number of people working full-time actually fell. That's just for starters. The Survey includes involuntary part-time workers, as well as those who want to work but have stopped looking, and that puts the real unemployment rate for June at 14.3 percent, up surprisingly from 13.8 percent in May.
At this stage of an expansion you would expect the number of part-time jobs to be declining, as companies would be doing more full-time hiring. Not this time. So in this “Long Misery” of a recession, we have the extraordinary situation of millions of enforced part-timers by necessity taking these jobs because they are the only employment opportunities available to them, as businesses increase their reliance on independent contractors and part-time, temporary, and seasonal employees. Even government payrolls have been shrinking, not only in state and local lay-offs but more recently at the federal level. In June of last year, 58,000 federals workers were part-timers. This year it's 148,000, and we still don't know how the sequester will play out, for many agencies have resorted to furloughs rather than layoffs.
This is also reflected in the latest unemployment report where the biggest gains came from leisure and hospitality industries, extending from hotels to fast-food restaurants. Of the 195,000 new payroll jobs, 75,000 were in restaurants and bars, where the average weekly paycheck is about $351, less than half the figure for all other private industries. Not to mention that they have fewer shift hours especially in the restaurant world, which has averaged 26.1 hours per week versus 34.5 hours for all private employers.
What's going on? The fundamentals surely reflect the feebleness of the macro-economic recovery that began roughly four years ago, reflected in an average GDP growth rate annualized over the last 15 quarters at a miserable two percent. That's the weakest GDP growth since WWII. Over a similar period in previous recessions it averaged 4.1 percent. During the fourth quarter of 2012 and the first quarter of 2013, the GDP growth rate dropped below two percent, so we are not going to see an early ending to our misery. Bear in mind that this anemic growth is all we have to show for the greatest fiscal and monetary stimuli in 75 years, with fiscal deficits of over 10 percent of GDP for four consecutive years.
The truth is we do not have any clear idea how to improve our economies without the lubricant of serious growth in GDP, and the rate of GDP growth has been decelerating at the very moment we need it to be accelerating. According to the Brookings Institution, at the growth rate of roughly 195,000 jobs a month, it will take nine more years to return to the pre-recession level of employment, for we are 10 million jobs short of returning to normal levels of unemployment and labor force participation.
The most troublesome development is the decline of manufacturing. In 1978, we had 17.8 million manufacturing jobs. They represented 25 percent of all 71 million U.S. jobs. In 2012, we have a mere 11.9 million manufacturing jobs representing only nine percent of the 133.7 million total jobs, a decline that reflects automation and imports especially of labor-intensive products. Today's 97,000 steel workers produced nearly 10 percent more steel than 399,000 steelworkers did in 1980. In the clothing industry, output has dropped more than 80 percent since 1980 with the number of jobs falling from 1.3 million to 150,000.
You wouldn't know this from the standard unemployment headlines, but we are looking at an estimated 22 million Americans who are unemployed or under-employed, who are virtually invisible and mostly excluded from the calculation of the standard unemployment rate of 7.6 percent.
Obamacare is partially to blame. It requires employers with more than 50 workers to provide health insurance or pay a $2,000 penalty per worker. Under the law, a full-time job is defined as 30 hours a week, so businesses, especially smaller ones, have an incentive to bring on more part-time workers. Little wonder that the Obama administration announced it is postponing the employer mandate until 2015, undoubtedly to see if this will encourage more full-time hiring. But thousands of small businesses have been capping employment at 30 hours for they know their reprieve is only for one more year.
This weak recovery has been devastating to low and moderate income Americans, especially the young, the less educated, and minorities. Younger workers between the ages of 16-19 are enduring an unemployment rate is 24 percent. For African-Americans it is 13.7 percent and for Latinos it is 9.1 percent, compared to the overall average unemployment rate of 7.6 percent. And the national poverty rate now stands at 15 percent.
It gets worse. We are not regaining the kinds of jobs that we had before the recession. For example, as Federal Reserve Governor Sarah Bloom Raskin pointed out recently, two-thirds of all jobs lost were in moderate wage occupations such as manufacturing, but less than one-quarter of the subsequent job gains are in these occupations. She goes on further to note that recent jobs gains have been in mostly lower-wage occupations such as retail sales and food services which accounted for about one-fifth of the job losses but a bit more than one-half of subsequent job gains.
Another critical issue is chronic long-term unemployment with 36.7 percent of the ranks of the unemployed without work for at least six months, raising the question of whether or not they will have a chance at being called back. Many may be seen as permanently unemployable as their skills deteriorate, leading to the possibility of a structural unemployment problem such as Europe experienced in the 1980s. Nor are we getting back many of the jobs that were lost. The number of hires during April and May is the same as it was in January 2009, when job losses were at their highest of the recession. In fact in the 45 months since the recession ended, 113,000 fewer jobs a month have been created compared to a normal recovery according to the Congressional Joint Economic Committee. If we created as many jobs as typical in a normal expansion, roughly four million more Americans would be collecting a paycheck.
Today we have close to seven million multiple job-holders, which means a good portion of the new jobs created were in effect second or third jobs going to people who were already employed elsewhere. Then there is the stunning feature of the current civilian workforce participation rate, which at 63.5 has dropped by a shocking 2.2 percentage points since the recession ended, an event that never has happened during previous recessions. Another statistic that underscores why this is such a dysfunctional labor market, is that the number of people leaving the workforce during this economic recovery has actually outpaced the number of people finding a new job by a factor of nearly three, as pointed out recently by David Rosenberg of Gluskin Sheff.
What we clearly need is a policy that will nourish the revamping of our capital stock where investment has plunged to the lowest levels in decades. We must also target policies to nourish our high-tech industries, which will in turn inspire manufacturing these products at home and thus help create new jobs. This means we will have to prepare a skilled workforce for manufacturing and to be willing to increase the number of visas to foreign graduate students in the hard sciences who are now forced to leave America and who then work for our competitors in other countries. Similarly, we must improve the processing through our patent office, the channel for innovation, but which has been a long-time impediment to speedy process. Finally we should engage in a major infrastructure program to improve our airports as we once did for our railroads and highways, such as new technologies that would greatly accelerate airport landing and take-off.
It is imperative that we focus on innovative and creative policies, otherwise the five-year crisis in employment will continue even when the economy seems to be recovering. Without such a focus, millions of American families whose breadwinners are unemployed or underemployed will remain frightened and pessimistic, especially the young who are entering the workforce. Helping tomorrow's workforce must be another top economic priority. We need a recovery that is real and not phony.
- Read the U.S. News Debate: Has the Short-term Deficit Been Reduced Enough?
- Read Chad Stone: Smart Budget Choices Can Boost Recovery, Reduce Debt and Deficit
- Read Pat Garofalo: Bank of America's HAMP Foreclosure Problem Is Holding Back the Economy