by NYF Team on July 18, 2011
Dr. Lawrence Mishel is president of the Economic Policy Institute. He has previously held a research position at the US Department of Labor and served as a faculty member at Cornell University’s School of Industrial and Labor Relations, and has researched extensively on labor markets, and wage and job quality trends. He spoke to the New York Forum about the disappointing job-growth in June.
NYF: I wanted to start by asking you why the June job figures were so bad.
LM: I think we should put this in a bigger context. There were three months where we had roughly 200,000 jobs created a month and people were feeling better, but in fact, 200,000 jobs a month is far fewer than we’d need to rapidly move the unemployment rate down. There’s a growth of the labor force each month, and to absorb the new workers you need to create at least 100,000 jobs. My bar for what is needed and appropriate is at least 300,000 jobs each month. That’s what we were creating in the late nineties, and unless we do that we won’t work off the backlog of jobs we need. We are short now over 11 million jobs, because we’ve lost 7 million or so, and because the recession has been going on for three years. So we need to add to our job base, not just recover the ones we’ve lost.
What was disappointing about the last month was that the number of jobs created were paltry, and reflected even a revision down of the jobs created in the prior month. Every indicator in that report was disappointing. The wages of workers actually fell a penny – and these are not inflation adjusted – the hours of work fell, the number of people working part-time for economic reasons grew. Basically all the indicators were looking at a labor market that is backsliding.
NYF: Unemployment is at 9.2%. Do you think that it may rise in the next few months?
LM: It may vary a bit or go a little bit down. I could imagine it rising some more but essentially it’ll probably at some point start dropping. What worries me is that even now the projections for the end of 2012 show unemployment at 8% or more. That is higher than it got in the last two recessions — and that would be five years since the downturn. If you want to look and see how many people are adversely affected: 9.2% of people are unemployed and there’s something like 16.5% underemployed, but that is the number of people unemployed or underemployed in June. Now, there are people who are unemployed in June who are going to be working in July, and people in June who are working who are going to be unemployed in July, so roughly twice as many people are unemployed at some point during the year as are unemployed in any particular month. If we have 16.5% of people underemployed in June, it suggests that one out of three workers are going to be underemployed at some point during the year.
The reason I emphasize that is that somehow people think that if we have 9.2% unemployment, then 90% of the people are okay. That’s not really true.
NYF: Do you think that the administration is pursuing the right policies at the moment?
LM: I think hardly anybody is talking about doing anything that will really move the dial. The best thing the administration is talking about doing is getting the unemployment insurance benefits renewed for 2012 and expanding the payroll tax holiday on the employee-side only. These will be helpful.
You have to understand that according to economic analysis – the Congressional Budget Office and Moody’s Economy.com – giving people unemployment benefit is one of the best things you can do for creating jobs. It’s not just about helping the unemployed: by giving people money who are going to spend it, they go out to the drugstores, the supermarkets, they buy things. You’re injecting a lot of spending in the economy.
NYF: Some people would say that Americans need to be more entrepreneurial, to retrain so as to be more employable. What are your thoughts on that argument?
LM: I don’t know what they’re talking about! We have a very entrepreneurial economy. If you look at surveys of people that are unemployed, they are working very hard to get a job. Right now there are 4.7 unemployed workers for every job opening, and that is compared to the worst moment of the last recession where the ratio was 2.8 to 1. We are talking about a phenomenal lack of jobs. And it’s evident that there’s the highest unemployment ever for college graduates. In fact, if you look since the beginning of the recession, unemployment has doubled, essentially, for every educational group.
NYF: Obama’s statement linked the deficit and the debt-ceiling to the job numbers. Was that the right approach?
LM: You know, if he were able to get a ten-year deal on the deficit, it would not create one more job in America. That is not the problem facing companies. If you look at what companies say their major problem is – and I’ve just been looking at the survey of the NFIB, which is a small business group – the single largest problem is that they face poor sales, meaning there’s not enough customers.
NYF: So it’s not to do with taxes?
LM: No. And in fact I’ve looked at the taxes and the regulations. Businesses are no more concerned about taxes now than they were in Reagan’s second term, or George Bush Sr.’s term. There’s not been a change. Small businesses worry about taxes; their worry is not greater now than in the past.
NYF: Is the uncertainty about the debt ceiling having a negative impact on companies’ confidence and therefore their desire to hire?
LM: Listen, I think that if we don’t renew, if we don’t extend the debt ceiling, we will end up really hurting the economy, but it’s not happening ahead of time.
NYF: Would you say the administration is doing the best it can?
LM: It’s absolutely not doing what it can. It should have done more things to generate jobs because 1) people are suffering, and 2) by not generating jobs we are scarring the future. All the young people coming into the labor market who can’t find work are going to have a lifetime of lower earnings. All the children in school whose parents are unemployed or poor or stressed out are going to do far worse in school because of this recession. The idea that we have to worry about the deficit that our grandchildren are going to pay is coming at the expense of the fact that we are now hurting our grandchildren as they actually live.
We should be doing things: raise the deficit for a few years, temporarily. Spend more, on infrastructure, relief to the states, safety net benefits, payroll tax holiday, to inject money into the economy, to expand the demand for goods and services and therefore employment.
NYF: To increase consumption?
LM: Right: because consumers aren’t going to do it. They are in the process of what’s called deleveraging. They’re paying off their debts, they’re trying to save more. And they are bedeviled by slow wage-growth and unemployment, and the loss of wealth – housing wealth and stock wealth.
NYF: Do you you see things getting better in the short-term future?
LM: I think we’re going to muddle along, which to me is unacceptable. We’ve been at essentially 9% unemployment or more for two years. This is unconscionable and unnecessary. What one party is saying they want to do will absolutely crater the economy. The other one is not talking about anything that will really help much.
I think that the policy discussion in Washington is almost besides the point and what it really says to the American people is, ‘You’re just going to have to tough it out.’ That’s what’s unacceptable.
Next week: Innovation