Light at the End of the Unemployment Line? (Aug 6th)


8-06-09, 10:51 am

Economists are attributing a projected easing of economic contraction in the second quarter of this year primarily to President Obama's economic recovery act. According to Economic Policy Institute economist Josh Bivens, after a contraction of the Gross Domestic Product, the measure of all economic activity, over the past two quarters of an annualized rate of negative six percent, the GDP for this past quarter will come in at about negative 1.0 percent. Without the President's economic recovery act, the number would have been three times higher, he reports.

According to Bivens that means 720,000 jobs were created or saved between April and June. And without the recovery act, job losses would have been 50 percent higher. According to Wall Street estimates, the President's economic policy added three points to the GDP in the pst three months. Bivens writes, 'A GDP report showing a notable slowing in the rate of contraction would indicate that the recovery package is working at least as well as expected, and perhaps even a bit better.'

Economist Christian Weller described the economic hole 'we found ourselves in was much larger than we originally thought.' He pointed out that the Bureau of Economic Analysis, which makes pronouncements on whether the country is in recession or recovery among other things, revised its own estimates of GDP rates between the official start of the recession and recent months. BEA revealed that the economy contracted at a negative 2.8 percent rate over that time period rather than negative 1.8 percent.

The good news, Weller added, is 'we certainly have ended the downward spiral. We're still shrinking at about one percent at this point, but we're no longer in that free fall that made our hearts pound and stop sometimes.' Weller attributed the end of the free fall primarily to the President's economic stimulus package.

The other pillars of economic strength – business investment, consumer spending and the labor market – remain weak or stagnant. Weller argued, 'that means for the time being public policy cannot take its eyes off both the economy and the labor market, that we will have to pay more attention and possibly make more interventions to really see ultimately and sustain a strong recovery in the labor market that will generate the millions of jobs that we need.'

Put simply, the President's economic policy works. The bad news is that the necessary politics that made the economic package smaller than it needed to be, i.e. compromise with Republicans, has meant that while it has generated new economic activity and may indeed turn GDP statistics around more quickly than the doomsayers predicted and Republicans hoped, so far the jobs picture remains the 'lagging economic indicator.'

Glimmers of economic hope remain overshadowed by this week's new jobless numbers. According to Department of Labor (DOL) statistics released today, Aug. 6th, almost 6.3 million people received unemployment benefits during the week ending July 25th. Meanwhile, 2.75 million people participated in the Emergency Unemployment Compensation (EUC) program, which provided additional support to workers unemployed for more than six months. This number has steadily climbed over the course of the recession and, by comparison to this time last year, only 127,000 people claimed EUC benefits, DOL reported.

DOL also reported that initial jobless claims for unemployment benefits for the week ending Aug. 1st decreased over the previous week by 38,000 to 550,000. This means that 550,000 newly laid-off people applied for unemployment benefits during that week. This week's numbers put the moving four-week moving average down by about 4,750, the DOL reported.

Put into perspective, in July 2007, just five months prior to the official beginning of the recession, the weekly average of new jobless claims stood at approximately 313,000. Still, the data from July shows an improvement over the weekly jobless numbers since January. Since the end of January, the weekly initial jobless claims number never dipped below 600,000, but this month, the numbers have stayed below 600,000.

According to the DOL figures released July 2nd, the unemployment rate rose a point to 9.5 percent in the month of June, higher than economists have predicted. Most economists expect the rate to grow to over 10 percent by the end of 2009.

The total number of unemployed workers jumped to 14.7 million in the month of June, a rise of upwards of 7 million since the beginning of the recession in December 2007. Some 3.2 million jobs in high-paying manufacturing and construction industries have been shed, leading to a rippling effect throughout the economy.

While the President's recovery act, passed last February, has worked as expected, the hole in the economy has been far larger than predicted. This fact has led labor movement leaders to call for a second economic package that will focus directly on filling the massive jobs deficit.

In its recent Executive Council meeting, the AFL-CIO predicted that inattention to the worsening jobs picture will harm prospects for economic recovery. 'It is crystal clear that urgent action from the federal government is needed to boost economic growth and jobs, and invest in America’s future: we need a second installment on the Obama administration’s economic recovery program, and this second installment must focus like a laser beam on job creation,' read a statement from that federation.

The statement added, 'It will require public investment and other spending to boost demand and create jobs directly. This must also be coupled with efforts to ensure that credit is made available to manufacturing interests to help stimulate production and job creation.'

Along with a new round of aid to the states, the statement called for additional investments in schools, hospitals and other public infrastructure. It also urged putting people back to work by keeping shuttered factories open and converting them to production of new 'green economy' technologies.

The worsening jobs picture prompted the AFL-CIO to launch a new Web site, Unemployment Lifeline, designed to help unemployed workers find the resources they need to survive in the recession. The site provides information on local aid for unemployment compensation benefits, child care, medical care, utility assistance and more. It also links workers to political action on such issues as passing the Employee Free Choice Act, universal health care reform and more.

AFL-CIO President John Sweeney called for sweeping action in a press statement. 'We also must make broad-based economic changes to have sustained economic growth and an economy that works for everyone,' he stated. 'We must deal with our country’s unsustainable trade deficit. We must reform our financial regulatory system to provide more transparency and government oversight and regulation. And we must pass the Employee Free Choice Act so workers can win the freedom to form unions and bargain collectively with their employers for fair wages, security and benefits.'

Change to Win spokesperson Greg Denier explained that a real economic stimulus package for working families would include three things: a minimum wage indexed to inflation, a major overhaul of the health system and passage of the Employee Free Choice Act. “The problem in the economy today is that productivity and profitability increased while paychecks shrank,' he said. 'We need to expand paychecks in order to expand the purchasing power of American workers.”