Last week's report by the Labor Department that the economy added 217,000 new jobs in May was celebrated in some circles as a milestone in an improving economy. As of May the economy had finally replaced all the jobs lost in the Great Recession.
But the flip side of that is this stark reminder: that gets the economy back to 2007 employment levels. That means everyone who has entered the workforce over the last six and a half years can't find a job.
Not all economists, it turns out, are celebrating.
“Employment is finally higher than before the recession, but don't cheer too loudly,” said Steven C. Kyle, an expert in macroeconomics and government policy and an economics professor at Cornell’s Dyson School of Applied Economics and Management. “Though we continue to register gains we have yet to catch up with population growth. That's why unemployment is still at 6.3 percent and labor-force participation is distinctly lower than in 2008.
Millions of people have simply dropped out of the labor force since 2007. A record number of people are now on disability. While a lot of people have started their own businesses – a hopeful trend – many others have simply given up looking for a job and moved back in with their parents.
Change from the past
Kyle says this is markedly different than what has happened after past recessions.
“Rather than having a ‘bounceback’ as is often the case after a recession, we continue to have more of a ‘trudgeback’ – a long, slow slog which someday will result in unemployment rates that are truly worth a cheer,” he said.
Kyle believes Congress is missing an opportunity to spur the economy by appropriating funds to rebuild aging infrastructure, a move that would create construction jobs. He says the fact that interest rates are near historic lows make it an opportune time to do it.
“Somehow, waiting for interest rates to rise before investing in infrastructure makes more sense to Congress than doing it now,” Kyle said. “That makes no sense to most economists, who would never wait for higher interest rates to, say, refinance their own houses. But then neither would Congressmen. What are they thinking about?”
Indeed there seems to be a growing disconnect between decision makers and ordinary consumers who, even if they have a job are struggling to make ends meet. Our story last week about the growing economic pressures on consumers brought a number of poignant responses from readers.
Denise, a single mom, wrote that as far as her life is concerned, the recession never ended.
“I pay over 50% of my income to rent alone,” she wrote in a comment on our story. “As a single mom of just 1, it makes it really difficult to afford anything 'extra,' after just paying basic living expenses. Daycare bankrupts me and continues to do so every time my child is off from school for the summer - just so I can work.”
Thomas, another reader, commented that he is one of the millions of Americans caught between stagnant wages and rising prices.
“I cannot afford to buy anything new,” Thomas wrote. “It is a struggle – I am still paying for winter heat. If I save by getting the bill reduced the power company raises the rates because they are not making enough money to pay dividends to stock holders. Cannot afford gas to drive and no money to spend if I get there. Everyone acts like this is a surprise. It's been going this way for years.”
Businesses doing fine with fewer people
This may be an over simplification, but one reason so many people find themselves on the margin is a structural change in the economy since 2008. When the financial crisis hit large businesses were quick to adapt to the dramatic drop in demand.
They downsized and became profitable again with fewer people. That's one reason Wall Street has done so well in the last four years – corporations are profitable.
The people who used to work for them, unfortunately, are not. And whether Wall Street likes it or not, the economy needs consumers with money, and who aren't afraid to spend it, to keep moving higher.
In that light the Los Angeles Times adds some sobering perspective to May's seemingly rosy jobs report. Since January 2008, the economy has added 2.86 temporary jobs, a 16% increase. Manufacturing jobs have declined by 11.7% while construction jobs are down by 20%.