7-09-05, 9:27 am

When the Bureau of Labor Statistics announced yesterday an increase in payrolls by 146,000 for the month of June and a slight drop in the unemployment rate, the big media praised the growing economy. Unfortunately, robust job growth simply hasn’t returned to the US economy.

Over the past two months, in fact, the average rate of growth has been only 125,000, not quite enough to match the number of jobs needed just to cover the new workers entering the economy each month let alone make up for lost jobs. Additionally, forecasters’ predictions haven’t matched actual figures.

One disturbing trend in the jobs situation that hasn’t been discussed in the media is the unusually high level of long-term employment. Long-term unemployment refers to the rate of unemployed persons seeking work for more than 6 months.

According to the Economic Policy Institute, a non-partisan think tank, on historical average, when the economy has the current unemployment rate it shows a long-term unemployment rate of 10.7 percent. Right now, the long-term unemployment is close to 18 percent.

The rosy image touted by the Bush administration simply doesn’t hold up under close examination. The manufacturing sector, for example, continues to see alarming weakness. Manufacturing is the basis of industrialized economies and historically has been the backbone of high standards of living for US workers as well as crucial parts of the tax base for many regions of the country.

Manufacturing has shown job losses in all but two months since June of last year. Factory employment is down 2.7 million since the recession and 1.6 million of these losses were added since the recovery is supposed to have started in November 2001. As a share of total employment, manufacturing is now only 10.7%, down 2.1 percentage points just since the recession began.

Another underlying weakness of the jobs picture is the relatively higher unemployment rate. Historically, periods of economic recovery have seen the rate of unemployment returning to pre-recession levels more rapidly than in this recovery. Under the Bush administration this four-year recovery period stands out from past experience. Budget and trade policies that redistribute resources to the wealthy are mainly to blame. One key feature of the slowness of this recovery is that unemployment remains well above the 4.0% level of 2000, so while the current figure of 5.0% is low, it is not full-employment. Further, over the past year, job growth has averaged 172,000. In the economic recovery of the 1990s, which also had a jobless phase, the comparable monthly average was 310,000.

Second, the low unemployment figure is skewed by the fact that the share of the population in the labor force is still much lower compared to the pre-recession size of the workforce. According to the BLS report for the month of June, this rate fell one-tenth of a point to 66.0%, the same level as one year ago, and down 1.2 points from its level at the start of the recession. For important parts of the workforce – adults age 25-54 (-1.5 points) and college graduates (-1.8 points) – the numbers are even more alarming.

The shrinking size of the workforce among these two sections of the population indicates weakness overall, and requires that we take the overall falling unemployment rate with a grain of salt. The unemployment rate only measures people actively seeking work in the workforce. As the workforce shrinks, people falling out of the picture simply aren’t counted by the BLS as unemployed even though they have no work.

In addition to this, the hourly wages of blue-collar workers and non-managers (about 80 percent of workers) grew at an annual rate of 2.8% last quarter, just about the rate of recent inflation readings. For the last year or so, growth in wages hasn’t matched rates of inflation, meaning that even with this month’s numbers, workers are falling behind. Even worse, the BLS reports that workers are working more hours. While this suggests some economic strength, it also says that wage growth is being propelled not by higher real wages but by more time on the clock.

The AFL-CIO blames bad corporate policies also for declining real wages. It argues, 'companies are using their profits to repair their balance sheets and boost CEO pay rather than create good jobs. And too many of the companies that are expanding their businesses are investing abroad rather than in the U.S.'

In a press statement, the labor union said, 'We must reverse the misguided policies that are undermining our economic security and put America back to work, producing more of what we consume and providing the good jobs we need to raise our families and build strong communities.'

It is clear that the Bush administration adopted no policies aimed at directly aiding working people when times got rough. In fact, services designed to protect workers in hard times were cut back in order to pay for tax cuts for the rich.

Real economic recovery requires serious intervention by the federal government. Serious investment in public education at all levels, worker retraining, massive direct aid to social safety net spending, and direct investment in infrastructure rebuilding are important steps the government can take to alleviate hardships faced by workers.

Instead, Bush turned in tax cut after tax cut for the rich. He misled us into a war that has drained hundreds of billions from our coffers, and now he shrugs and says, '9/11?'



--Contact Leo Walsh at pa-letters@politicalaffairs.net.