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The Labor Conundrum
The speed of America's now historic employment contraction reflects how puzzling this economic slide has been. Recall that the crisis has included assurances from the chairman of the Federal Reserve that it was over when in fact it was just getting started and a confession from a former Fed chairman that much of what he thought was true for decades now appears to be wrong. Nowhere is this bafflement clearer than in the area of employment.
When compiling the "worst case" for stress-testing American banks last winter, policymakers figured the most chilling scenario for unemployment in 2009 was 8.9% a figure we breezed past in May. From December 2007 to August 2009, the economy jettisoned nearly 7 million jobs, according to the Bureau of Labor Statistics. That's a 5% decrease in the total number of jobs, a drop that hasn't occurred since the end of World War II. The number of long-term unemployed, people who have been out of work for more than 27 weeks, was the highest since the BLS began recording the number in 1948. Jobless figures released Sept. 4 showed a 9.7% unemployment rate, pushing the U.S. unthinkably ahead of Europe, with 9.5%.
America now faces the direst employment landscape since the Depression. It's troubling not simply for its sheer scale but also because the labor market, shaped by globalization and technology and financial meltdown, may be fundamentally different from anything we've seen before. And if the result is that we're stuck with persistent 9%-to-11% unemployment for a while a range whose mathematical congruence with that other 9/11 is impossible to miss we may be looking at a problem that will define the first term of Barack Obama's presidency the way the original 9/11 defined George W. Bush's. Like that 9/11, this one demands a careful refiguring of some of the most basic tenets of national policy. And just as the shock of Sept. 11 prompted long-overdue (and still not cemented) reforms in intelligence and defense, the jobs crisis will force us to examine a climate that has been deteriorating for years. The total number of nonfarm jobs in the U.S. economy is about the same now roughly 131 million as it was in 1999. And the Federal Reserve is predicting moderate growth at best. That means more than a decade without real employment expansion.
We're a long way from Hoovervilles, of course. But it's not hard to imagine, if we're not careful, a country sprouting listless Obamavilles: idled workers minivanning aimlessly through overleveraged cul-de-sacs with no way to pay their mortgages, no health care, little hope of meaningful work and only the hot comfort of angry politics.
This is why the problem of how America works needs to become the focus of an urgent national debate. The jobs crisis offers an opportunity to think in profound ways about how and why we work, about what makes employment satisfying, about the jobs Americans can and should do best. But the ideas Washington has delivered so far are insufficient. They reflect a pre9%-11% way of thinking as much as old defense policy reflected a pre-9/11 notion of who our enemies were. The funding for job creation in the American Recovery and Reinvestment Act was based on an assumed 8.9% unemployment rate. Now 15% is a realistic possibility. And yet we're hearing few interesting ideas about how to enhance America's already groaning unemployment support system as millions of Americans sit idle. Tangled in the debate over health care and bleeding political capital the White House may find itself too weak and distracted to deal with the danger of joblessness.
We can't afford to wait. The longer someone is unemployed, the harder it is to get back to work, a fact as true for the nation as it is for you and me. As the Peterson Institute's Jacob Kirkegaard explains, "It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem." Past crises have illustrated that lesson: the longer you wait, the harder it is to contain. This is as true for joblessness as it was for subprime mortgages, al-Qaeda and computer viruses.