Light at the End of the Unemployment Line? (July 30th)


7-30-09, 10:40 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 1.5 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.'

So the good news is that 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 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.'

These glimmers of economic hope remain overshadowed by this week's new jobless numbers. According to Department of Labor (DOL) statistics released today, July 30th, almost 6.2 million people received unemployment benefits during the week ending July 18th. Meanwhile, Nearly, 2.7 million people participated in the Emergency Unemployment Compensation (EUC) program, which provided additional support to workers unemployed for more than six months. 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 July 25th increased over the previous week by 25,000 to 584,000. This means that 584,000 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 8,000, 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.

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. The bright spot, if it could be called such, was that the loss of 467,000 jobs in that month is well below the average monthly decline over the previous seven months. For the growing number of unemployed, however, there is little consolation. Numbers for the month of July will be available next week.

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.

Accurately sensing a growing anxiety among Americans that an economic turnaround hasn't been swift enough, the Obama administration this month made a strong push to speed up economic stimulus projects. Some administration officials have signaled the need for a second stimulus package, while others have adopted a wait-and-see approach.

While the President's recovery act, passed last February, has worked as expected, experts state, the hole in the economy has been far larger than predicted. Labor movement leaders have called 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.”