New unemployment data released last Friday offered a mixed and confusing picture of the labor market: Unemployment fell sharply to 9.0% in January from 9.4% the month before, but job creation was much lower than expected, with just 36,000 new jobs added in January. What is clear from the data is that there is still a severe shortage of jobs.
Fewer jobs today than in January 2000
Economist Heidi Shierholz, in her analysis of the latest employment report, noted that snowy weather throughout much of the country might have impacted the data for January and said it would take at least another month to know whether the labor market is indeed rebounding as strongly as the sharp drop in unemployment suggests.
Even under the best-case scenario, there remains a lot of ground to be made up, and not enough jobs to go around. Shierholz noted that the U.S. labor market has half a million fewer jobs than it had in January 2000 and about three-quarters of a million fewer than at the start of the Great Recession in December 2007. Given the growth in working-age population, the labor force would have been expected to increase by about 4.1 million between December 2007 and December 2010 just to keep up with that growth, she noted.
Additional sobering data about the labor market was released earlier this week in the Job Openings and Labor Turnover Survey, which showed that there were 4.7 unemployed workers competing for every job opening in December. Although that ratio of unemployed job seekers to job openings has improved since peaking at 6.3-to-1 in July 2009, it remains considerably worse than the 2001 recession, when the ratio remained below 3-to-1.
Unemployment and the Federal Reserve
On February 11, Economist Josh Bivens, author of the new book, Failure By Design, testified before the House Subcommittee on Domestic Monetary Policy and the Technology Financial Services Committee about the role of monetary policy in creating jobs and stabilizing the economy. Bivens said that Fed intervention in the early months of the recession prevented the economic crisis from becoming much worse.
He also said that because the Fed’s actions were not accompanied “with the same degree of urgency on the part of (other) policymakers, we remain today at intolerably high levels of unemployment.” But blaming the Fed for the jobs crisis, he added, is “quite odd. They have been by far the policymaking institution that has responded most forcefully and in the timeliest manner to the crisis.”
More state research shows public employees are not overcompensated
EPI has recently released a series of papers that build on the 2010 report Debunking the Myth of the Overcompensated Public Employee , a study of private and public sector wages which showed that full-time state and local employees are actually undercompensated, after controlling for factors such as level of education, hours worked, and non-cash compensation. The new EPI studies from Indiana, Michigan,Ohio, and Wisconsin show that public workers in those states are not overcompensated relative to comparable workers in the private sector. The research is relevant at a time when public sector employees’ compensation is commonly cited as the cause of budget shortfalls that many state and local governments are facing.
Symbolic gesture of fiscal responsibility would cause real pain
Two recent analyses published on EPI.org take a look at some of the budget proposals put forth by Republican leadership in Congress. In Paul Ryan’s Budget: Unnecessary Pain with no long-term gain, Policy Analyst Andrew Fieldhouse shows how Ryan’s backdoor budget resolution is a largely symbolic gesture of fiscal responsibility that would have “devastating consequences in key public investments and human needs programs,” but would still be dwarfed by the $374 billion that was added to this year’s deficit by the tax deal last December. Republicans’ proposal to “right our fiscal ship” throws more workers overboard, by Policy Analyst Rebecca Thiess, looks at the 70 funding cuts proposed so far by the House Appropriations Committee. “Cuts of this magnitude will undermine gross domestic product performance at a time when the economy is seeing anemic post-recession growth,” Thiess writes.
EPI in the news
–EPI President Lawrence Mishel published a piece in The American Prospect, The Overselling of Education, in which he explains that the country’s biggest economic problem is not a skills deficit, but a jobs and wage deficit. EPI Founding President Jeff Faux also had a piece, America’s Trade Policy of the Absurd, in the Prospect,showing how free trade agreements often favor the interests of multinational investors over American workers.
–The Los Angeles Times quoted Heidi Shierholz in a story about the long-term unemployed.
–MSNBC quoted Shierholz in a story about high unemployment among veterans.
–Multiple media outlets including Time Magazine, Forbes, and a New Yorker blog cited EPI’s analysis of the latest employment data.