Students entering college four years ago could reasonably assume that the recession would be a rapidly receding speck in America’s rearview mirror by the time they graduated. After all, in the four deepest previous recessions — those of 1953, 1957, 1973 and 1981— employment three years after those downturns began was on average 4.7 percent higher than the pre-recession peak.
Not so this time around. The recession that officially began in December 2007 officially ended in June 2009. Yet today’s graduates face a dismal job market.
The most recent unemployment report was chock full of more bad news: Only 18,000 net new jobs in June, an increase in the unemployment rate to 9.2 percent and a downward revision of previous months’ estimates of job creation (meaning even the earlier anemic reports of job creation overstated the recovery). To put it in perspective: Canada created more net new jobs last month (28,400) than we did — and we have nine times their population.
The situation is actually worse than reported. Of the 14 million Americans officially counted as unemployed, 6.3 million — 45 percent, the highest since 1983 — have been out of work for more than half a year. Another 8.6 million workers have had to settle for part-time work, either because their hours have been cut back or that was all they could find. If these 8.6 million underemployed workers were included, the reported unemployment rate would be nearly 15 percent.
This dismal situation won’t improve markedly, as long as weekly initial unemployment claims are running higher than 400,000 — as they have for the last 13 weeks. The weekly initial claims figure must drop to a consistent mid- to low-300,000 range, at most, before significant job growth can occur.
So where’s the recovery?
Since the summer of 2009, the American economy, as measured by gross domestic product, has been expanding, slowly. First-quarter GDP growth was a tepid 1.9 percent. In contrast, coming out of the 1981-82 recession, we had five straight quarters of 7 percent-to-9 percent GDP growth.
Layoffs are down from their peak in early 2009, but job creation is still in the trough — stuck about where it was two years ago. This leaves us short about half a million new jobs each month from what’s expected in a good economic recovery. This jobs deficit reflects the fact that creation of new businesses — the traditional engine of job growth — was down 23 percent in 2010 from 2007.
Why? Confidence, capital and credit fuel entrepreneurship and economic expansion. Confidence is currently the most sorely lacking component, and takes a beating with every headline about high unemployment, higher taxes, expensive government mandates, lawsuit-promoting legislation and federal fiscal recklessness. Diminishing faith in the present and future cripples a recovery. It also damages consumer confidence. The Conference Board Consumer Confidence Index was down in June, to 58.5. A few years ago, figures in the 90s were the norm.
Washington could hardly have waged a more effective war on private-sector job creation these last two years. To foster entrepreneurship, expansion and job creation, more leaders at all levels of government have to demonstrate some understanding of what it takes to build and grow businesses in the private sector.
Even a healthy economy and labor market would have struggled under the additional expenses enacted and proposed in 2009 and 2010 — from healthcare mandates and higher taxes, to carbon cap-and-trade and delay in extending the last decade’s tax reforms. We’re just 18 months away from a repeat of that latter circus. Unless Washington’s job-killing agenda is reversed, this economy cannot rev up enough to get American back anywhere near full employment.
Chao served as secretary of labor from 2001-2009 and is a Distinguished Fellow at The Heritage Foundation.