Economists regard the unemployment rate as a “lagging indicator” because it tends to move well after other gauges of economic strength. But unemployment is the indicator to which normal people pay the most attention.
One could reasonably argue that it’s economists who are the real lagging indicators. We are in the midst of the biggest economic crisis since the Great Depression. It began as a recession in December 2007, but it took almost a year for economists to agree that a recession had even begun.
Today, debate has shifted from when the recession began to how to get out of it. Given the politics in Washington, it is a fair guess (actually a certainty) that enacting the long-term policies needed to grow the economy will wait until after the November elections.
But sidestepping the polarizing debate about austerity versus growth, one immediate straightforward step Congress can take is to pass the surface transportation bill before the current extension expires June 30.
Our economist friends estimate that every billion dollars invested in transportation infrastructure yields 25,000 jobs.
Early this month, the Bureau of Labor Statistics reported that only 69,000 new non-farm jobs were created in May, about one-third the average monthly gain for the first three months of the year. Mainstream economists were expecting something on the order of 150,000 new jobs.
There is no putting a gloss on it. These numbers are miserable. We added the smallest number of workers in a year, causing the unemployment rate to tick upward to 8.2 percent from 8.1 percent in April. That makes 40 consecutive months of unemployment over 8 percent.
To make matters worse, job growth figures originally reported for March and April were lowered by 49,000 and the number of workers unable to find jobs for 27 weeks or more rose from 5.1 to 5.4 million. The broadest measure of unemployment, the number unable to find full-time work or too discouraged to look for a job, now exceeds 23 million, up from 14.5 to 14.8 percent of the workforce.
This may be the most significant measure of joblessness, since many part-time and discouraged workers experience the same negative psychological and social impacts as those who are totally unemployed.
The economic impact of so many unemployed workers exerts a severe drag on the nation. Workers and their families who must struggle to make ends meet on unemployment benefits are no longer able to participate fully in the nation’s consumer economy. Consumer spending accounts for some 70 percent of gross domestic product, and their enforced spending curtailments further reduce GDP and hold back recovery. It is an economic multiplier effect in reverse.
That’s not all. A whole generation of fresh college graduates can’t begin the careers they’d hoped for because of the moribund job market and may have to settle for jobs that are much less valuable to America’s future.
Consumer spending requires consumers to have income. This month’s survey and the revisions to recent labor reports show that hours worked are down, and wages and payroll are down and not keeping up with inflation. GDP was revised down to 1.9 percent for the first quarter.
So forget nation-building in Afghanistan, balancing the federal budget, or taming the Wolves of Wall Street. These are obviously important, but they all vie for second place to the overriding challenge of putting Americans back to work. This must be the federal government’s No. 1 priority for the foreseeable future.
The nation needs to add 250,000 jobs per month, every month, for five years to get back to the 5 percent unemployment rate we had in 2007. How are we going to achieve that? State transportation departments have been operating on short-term extensions of the last surface transportation bill since September 30, 2009. The current extension, which is the ninth, is set to expire June 30. Maintaining and improving our highway and transit systems is important. So are the thousands of jobs that will be lost if Congress does not move on a highway and transit bill.
originally published: June 15, 2012