Will the Job Market Get Better?
Economists have been studying how this recovery differs from previous ones. Last Friday, Dave Altig at the Atlanta Fed posted a graph comparing the current economic recovery to the previous five. As you can see above, employment has been slower to return to pre-recession levels.
Jonathan McCarthy and Simon Potter at The New York Fed’s Liberty Street Economic blog chart labor market indicators for the last five economic cycles [h/t James Pethokoukis]. Most notable in the current recovery is the sharper drop in the labor force participation rate and the L-shape of the employment-to-population ratio. People have simply dropped out of the labor market. Some have retired or gone back to college or simply given up in finding work.
Yesterday, at the National Association for Business Economics Annual Conference, Federal Reserve Chairman Ben Bernanke said, that the “job market remains far from normal” and “remains quite weak relative to historical norms.” He noted that “private payroll employment remains more than 5 million jobs below its previous peak” and “the unemployment rate in February was still roughly 3 percentage points above its average over the 20 years preceding the recession.”
Not counted as unemployed is a large number of workers who have dropped out of the labor force because of the labor market’s weakness. The Chamber’s chief economist Marty Regalia writes that these workers "are discouraged over their prospects of finding suitable employment.”
As the Pew Research Center found in 2010, the impact on these frustrated workers is especially significant. It found that 56% of long-term unemployed workers have endured declines in their family’s income, 43% said their long-term career goals have been negatively impacted, and 29% have settled for a worse job than the one they had before.
Despite the positive jobs numbers in recent months, more job creation is needed. Bernanke laid out the answer: “more-rapid economic growth.”
Absolutely, but how? What can drive growth and put people back to work? The Chamber has its American Jobs and Growth Agenda to energize the recovery:
- Produce American Energy and Rebuild Infrastructure
- Expand Trade and Tourism
- Enact Regulatory and Legal Reform
- Encourage Innovation
- Control Government Spending and Reform Entitlements
Pro-growth policies are needed to get employment back to pre-recession levels and encourage more workers to re-enter the labor market. More economic growth will generate more jobs. Our leaders in Washington talk about job creation, but they must act. Millions of Americans are waiting.