Six years after the financial crisis of 2008 and America is still eight million jobs short compared to pre-recession employment levels, according to a new report by the Economic Policy Institute, titled Six Years from its Beginning, the Great Recession’s Shadow Looms over the Labor Market.
Author Heidi Shierholz, an economist, shows that the US labor market has trailed far behind the stock market and corporate profits since the beginning of the Great Recession. The labor market “remains extraordinarily weak, with few job opportunities, crushing levels of long-term unemployment, and depressed wages.”
Employers say the demand for goods and services is simply not growing fast enough for them to consider taking on significantly more workers.
Shierholz argues that America’s lack of consumer demand demonstrates the importance of expansionary fiscal policy, “including large-scale ongoing public investments, the restoration of public services and public-sector employment cut in the recession and its aftermath, and the renewal of federal unemployment insurance benefits.”
For the US economy to return to pre-recession health, 7.9 million new jobs need to be created. The report forecasts that it will take approximately five years to get there at the current rate of job growth.
Many reports have indicated that the US needs to implement economic reforms in order to secure sustainable, long-term economic growth. The OECD in June 2014 made several suggestions.
The weak labor market hurts job seekers and those with jobs
Not only does the weak labor market hurt people looking for jobs, but also people in employment, who are worse off than they otherwise would be. When there are few job vacancies available it is an employers’ market. Workers find it more difficult to push for substantial wage increases, and employers fill job vacancies rapidly. Consequently, real wages have declined for most workers.
Shierholz said:
“American workers are still reeling from the worst economic downturn since the Great Depression. but it doesn’t have to be this way. Austerity driven by historically slow rates of public spending has held the economy back.”
“Government policies, including investments in infrastructure, public sector jobs, and federal unemployment insurance benefits could generate demand for workers and increase employment quickly.”
Source: Economic Policy Institute
Millions have dropped out of the job market
America’s improved unemployment rate since 2009 is mainly because a significant number of people have simply dropped out of the job market, while others have not entered because prospects are poor.
The country’s current 6.7% unemployment rate would shoot up to 10.3% if we included these people in the statistics.
Shierholz said “Today’s labor market weakness is not due to workers lacking skills for available jobs, but because there are not enough jobs – there are nearly three job seekers for every one open position.”