A hard look at the fate of the job market

Craig Glaser and others protest Florida Gov. Rick Scotts policies last week in Tampa. Scott had come to a local doughnut shop as part of his effort to perform shift work with ordinary Floridians. (Jay Nolan / Tampa Tribune)
Craig Glaser and others protest Florida Gov. Rick Scotts policies last week in Tampa. Scott had come to a local doughnut shop as part of his effort to perform shift work with ordinary Floridians. (Jay Nolan / Tampa Tribune)

Many worry that today’s sorry state is the new normal. Five experts sound off, and offer a host of far-reaching remedies.

Posted: August 07, 2011

Economists always say that employment is a lagging indicator, with an increase in jobs always following an improvement in the economy. But with the economy poised to tumble into a double-dip recession, the question must be asked: When does lagging turn into left behind in this endless coda to the deepest and most painful recession since the 1930s?

Nearly 14 million people remain unemployed, part of the 16 million who are either underemployed or too discouraged about their prospects to seek work. The result? The lowest proportion of willing workers compared with the general working-age population in more than a quarter-century.

It's almost too basic to say - people who aren't working aren't spending money. And businesses without sales can't hire, even as they work their existing employees beyond burnout.

For most of the decade, the unemployment rate hovered between 4.2 percent and 5.5 percent. But in May 2009, it topped 9.0 percent, and it has not budged below it, except for two months earlier this year.

Will robust employment ever return? If so, how?

Or, for a variety of reasons, is this the new normal?

We asked five experts to provide answers.  

Mark Price

Mark Price is a labor economist for the Keystone Research Center in Harrisburg. He specializes in construction employment, women in the labor force and low-wage work.

Is this the new normal?

There is nothing normal about the current job market. The economy is clearly sick, but there are treatments for this illness. Elected officials in D.C., Trenton and Harrisburg could choose to invest in the foundations of a strong economy - things like education, workforce training, and infrastructure. Instead, they are making deep cuts that are costing jobs and putting a further drag on the economy at a time when the private sector is weak.

What would encourage hiring?

As Massachusetts has started to do, the Commonwealth of Pennsylvania should bank at institutions that are not sitting on mountains of excess reserves, creating an incentive and moral pressure for more lending to small and medium-size businesses.

Pennsylvania should start a "Marcellus Jobs for Pennsylvanians" program to match out-of-work construction workers in the Commonwealth with openings in the drilling industry.

Pennsylvania should also use bond financing to create a "buy-low construction" program. Given the state of the economy, construction prices are routinely coming in 2 percent below normal levels, while borrowing costs are below 3 percent. Future taxpayers are going to end up paying more for new schools, roads, and bridges if we fail to take advantage of this once-in-a-generation opportunity.

Philip Kirschner

Philip Kirschner is president of the New Jersey Business and Industry Association, representing 22,000 New Jersey employers.

Is this the new normal?

No, 9.0 percent unemployment is not the new normal. However, for the short term, the unemployment rate will remain higher than we're used to seeing. The problems that led to high unemployment, especially the collapse of the housing market, aren't going to disappear anytime soon.

Companies were forced to get very lean and much more productive, and they're not going to start hiring in any great number until they see a consistent pickup in their sales for at least five to six months.

Longer term, history has shown our economy to be resilient. While the new normal for unemployment may not be 5.0 percent, I think a 6.0 to 6.5 percent rate is achievable.

What would encourage hiring?

The key ingredient is confidence. The pattern we've been seeing is a few good months followed by a few bad months. This does not inspire confidence.

It's the same for consumers. Most households aren't going to spend freely when they have to pay so much for gas and food and it's hard to make their monthly mortgage payments.

Since consumer spending drives two-thirds of economic growth in this country, the economy won't really get rolling until consumers feel confident that they have enough income, and it's secure.

Businesses need to see more stability and less uncertainty overseas, as this impacts exports, and they need to see more common sense coming from Washington.

Carl Van Horn

Carl Van Horn spends his time researching the effects of long-term unemployment. A public-policy professor, he directs the John J. Heldrich Center for Workforce Policy at Rutgers University.

Is this the new normal?

It is difficult to predict. The current slow-growth/ high-unemployment/ slow-wage-growth economy is likely to plague the U.S. economy for several years.

Today, 14 million people are officially unemployed - millions more are underemployed (part-time workers who want to be full-time) - and there are approximately four job seekers for every job opening.

Older workers are less likely to retire because the values of their homes have declined and their retirement savings have been decimated.

Therefore, absent a robust and sustained period of expansion at 3 percent or more in the gross domestic product, it will take many years to get back to the level of unemployment we experienced in 2007.

Unfortunately, the economic recovery will continue to be slow and painful for millions of American workers.

What would encourage hiring?

At the top of my list would be increasing investments in infrastructure - roads, bridges, highways, airports, and train corridors - and in basic and applied research in health and renewable energy.

These types of government-spending programs not only provide jobs now, but also make the economy more productive for decades.

Finally, government programs that provide partial, temporary wage subsidies to employers that retain and retrain workers - on-the-job training - are a proven strategy that would help employers and employees alike.

Tara Weiner

Tara Weiner, managing partner of Deloitte L.L.P. in Philadelphia, also serves on the board of the Philadelphia Science Center. She previously led the public accounting firm's national consumer practice.

Is this the new normal?

There is an often overlooked growth engine for the U.S. economy that plays an important role in determining job growth - the midmarket. Accounting for more than 24 million working Americans and nearly 40 percent of the national GDP, midsize companies are an important contributor to the economy.

There are still fundamental business challenges these midsize companies face that may contribute to the stagnant job market.

Access to financing and capital, government debt, and uncertainties related to taxes and health-care costs may restrain their optimism as they wait to see if the economy will improve. Many companies are cash-rich, though, and are continuing to spend on technology and training to prepare their business for growth when the economy rebounds.

What would encourage hiring?

The energy and health-care industries are top of mind and may be good areas for job creation.

Take the energy sector as an example. Once a matter confined to congressional committees and industry groups, today nearly every constituency is mobilized, from politicians, to corporations, to individuals in many corners of America and the world. Unions, too, are on the front lines, since they represent workers whose skills as plumbers, welders, and technicians can be transferred to new, clean-energy spheres.

Cheryl Spaulding

Cheryl Spaulding cofounded Joseph's People in 1995. A support group for unemployed people, it began at St. Joseph's Church in Downingtown and has since spread to 11 churches throughout the suburbs.

Is this the new normal?

When Joseph's People began, I honestly thought we would be helping unemployed people for one year and then we would disband when things went "back to normal and everybody got jobs." That "normal" never appeared. Now, in 2011, we are the largest we have ever been.

Why? Because there is a new normal and there are two sides to it. On the company side, it has a single goal - profit at any cost. Such a goal can only be served by the willingness of companies to abandon countries, communities, and people.

On the employee side, it also has a single goal - my career before everything else. Companies have sent a startling and chilling message to our younger workers: Expect nothing from us.

If we change nothing, the future of work in this country for [unemployed] workers over age 45 will continue to be devastating. We will impoverish our adult middle class.

What would encourage hiring?

We should begin with what we can most easily control: The state of Pennsylvania.

Small business is not going to sign up for programs; they hate all things government. We should provide vouchers and programs directly to the unemployed that give them bargaining chips to present to small businesses.

It's simple and easy to control: direct payments of cold cash to a small business for hiring an unemployed person.

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