In his State of the Union speech last night, President Obama offered strong support on behalf of major new investments in energy efficiency and renewable energy. In doing so, he echoed points he made in his inaugural address last month. This is all excellent news. Obama has of course been very strong on the environment in the past. In particular, the 2009 economic stimulus program—the American Recovery and Reinvestment Act—included $90 billion in funds for new investments in energy efficiency and renewable energy, a level of support that was orders of magnitude beyond anything that had been done previously in the U.S. Moreover, to a large extent, these investments have produced major gains toward a green economy that we desperately need. (Full disclosure: I worked as a consultant to the Department of Energy on implementing some of this program).
Two major pieces of economic news last week were that the U.S. has made literally zero progress in the past month in fighting unemployment or, over the past three months, in moving the economy onto a reasonable growth trajectory. Specifically, the official unemployment rate for January was 7.9 percent, up slightly from last December, at 7.8 percent, while GDP growth fell slightly, by 0.1 percent, over the last three months of 2012.
These figures would be bad enough on their own, but they are worse still when considered in a broader context. According to National Bureau of Economic Research, the official arbiters of when recessions begin and end in the U.S., we are now fully 3 ½ years past when the Great Recession ended. With all previous U.S. recessions since World War II, when you are 3 ½ years past when the recession ended, you could count on the fact that the recession had really, truly ended. That’s not the case this time, as these most recent anemic numbers on GDP growth and unemployment underscore.
The graphs below give a fuller sense of just how weak this recovery has been. The first set of figures compares this “recovery” from the Great Recession with the experiences of the previous eight recessions since 1953 in terms of unemployment and economic growth. The figures show the average unemployment and GDP growth rates for the first three full years after the Great Recession, as well as the average for the previous eight recessions.
As we see, for the first three years since the Great Recession officially ended in the second quarter of 2009, average unemployment was 9.2 percent. This compares with the average unemployment rate three years after the previous eight recessions, at 6.3 percent. In terms of GDP growth, the average quarterly economic growth rate since the most recent recession officially ended was 2.3 percent. This compares with the average rate coming out of the previous eight recessions of 4.5 percent.
How big a deal is it that the average unemployment rate three years after the recession ended was 9.2 percent as opposed to 6.3 percent, and that average growth was 2.3 percent rather than 4.5 percent?
Between July 2009 and June 2012—the three year span after the Great Recession ended—there were, on average, 155 million people in the labor force. If 6.3 percent of these people had been unemployed as opposed to 9.2 percent on average—i.e. if 93.7 percent had jobs as opposed to 91.8 percent—that would mean 4.5 million more people would have been holding jobs.
U.S. GDP averaged about $15 trillion over the three year span after the Great Recession officially ended. If the economy had grown at 4.5 percent per year—the average for the previous eight recoveries—as opposed to the actual 2.3 percent GDP growth rate over those three years, that would have generated an additional $990 billion in national income—i.e. nearly $1 trillion of national income was lost because of the weak recovery from the Great Recession relative to previous recoveries. If we were to divide that $990 billion in lost national income equally among every U.S. resident, that would mean that every resident lost nearly $3,200 due to the historically weak recovery.
Note that these calculations do not even take into account the most recent evidence showing zero improvements in either lowering unemployment or improving economic growth. What to do about it? I and my fellow Back to Full Employment bloggers have offered lots of proposals, and will keep doing so, along with many other sensible people. For now, let’s just go with the big point: there is no version of austerity—including all versions of cutting social spending and raising taxes on middle-income households—that will get the economy out of the ditch in which Wall Street shoved it in 2007-09.
New numbers last Friday showed an estimated 157,000 jobs were added to the economy in January, returning the unemployment rate to 7.9 percent. As more and more Americans remain mired in long-term unemployment, let’s take a look at the misconceptions that often arise about the unemployed.
1. People who receive unemployment benefits are slow to search for work.
This oft-repeated statement might have a chance of being true if benefits were unduly generous. They aren’t. Weekly unemployment insurance payment averaged $300 in 2010 and 2011, federal statistics show.
It’s important to understand that unemployment benefits aren’t intended to replace a worker’s income. They provide support so financial hardship doesn’t interfere with a newly unemployed worker’s job search. Think of these payments not as handouts but as investments; warding off long-term unemployment saves money in the long run, or so the theory goes.
In his second inaugural President Obama referred to iconic events in the history of gender, race and gay rights, putting the idea of equality at the center of his agenda. While several pundits were surprised or offended–depending on their political leanings–with the liberalism of Obama’s discourse, and a few noted the momentous effect of pairing gay rights with gender and race, nobody (at least to my knowledge) complained about the conspicuous absence of workers’ rights.
Okay, so maybe citing the notorious Haymarket riot and the martyrs of the Knights of Labor was too much to expect from an American president. In fact, Samuel Gompers and the American Federation of Labor (AFL), as it is well known, never had a positive view of the anarchists associated with more combative labor tactics. In part, that’s why while the whole world, knowingly or not, commemorates the Haymarket affair every May Day, Labor Day in the U.S. is relegated to the first Monday of September. But still a nod to labor would have been essential to really claim that the president is moving in a liberal direction.
There is a full throttle mayoral race going on right now in Los Angeles. Four major candidates are vying to succeed current Mayor Antonio Villaraigosa, who finishes his second term on June 30. Each of these candidates is asserting more forcefully than the next that she (or he) will be both a “fiscal watchdog” and “helpful to business.”
But can political leaders honestly be both “fiscal watchdog” and “helpful to business,” at least in the way that government leaders typically think of those things? On one hand, many leaders argue that we need to cut the pensions and health benefits of public employees and keep public services lean and mean. On the other hand those same political leaders advocate for cutting business taxes and giving away large subsidies to big developers who promise simply to “create jobs,” with few if any strings attached.