Today’s jobs report — which shows that employers cut 216,000 job in August, pushing the unemployment rate up to 9.7 percent — adds more evidence to the notion that we are headed towards a jobless recovery. While the full force of the recession seems to be behind us, getting back to where we were in terms of employment looks rather daunting:
Economists said the slower pace of job losses provided another sign that the recession was losing steam. The nation’s economic output is expected to rebound over the rest of the year after four quarters of contraction, and the housing market is gradually getting back onto its feet. But economists say employers must create 300,000 to 400,000 jobs a month to bring unemployment rates back to pre-recession levels — a difficult hurdle after such a prolonged downturn.
It’s hard to find many glimmers of hope in these numbers, especially considering that the U6, which measures broad underemployment, is at an all-time high of 16.8 percent. However, the decline is the least severe since August 2008, and much less severe than the 700,000 jobs that we were losing back in February.
Of course, the new numbers have ignited the monthly ritual of conservatives labeling the stimulus a failure. Rep. Eric Cantor (R-VA), after calling this week for completely canceling the stimulus, doubled down today, saying that the jobless numbers mean we should use stimulus funds to “pay down our debt.”
But as Bloomberg News pointed out, “rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment this week that it’s ‘too early’ to start exiting from the unprecedented stimulus measures aimed at stabilizing the economy.” Indeed, as Felix Salmon noted, the effects on economic activity of the overall number of unemployed workers “are huge.” “If each person ends up spending $20,000 less a year on average, that adds up to $138 billion in lost economic activity,” he calculated. It’s because of this vastly reduced activity that the economic stimulus is so important.
Economists at Goldman Sachs predict the U.S. economy will grow by 3.3 percent in the third quarter of this year, and that “without that extra stimulus, we would be somewhere around zero.” But it will take time for GDP growth to translate into job growth, meaning that conservative calls for canceling the stimulus or abandoning all manner of domestic policy items will likely continue. As Matthew Yglesias put it, “your sobering thought of the day is that the unemployment rate will very plausibly continue to edge up for six more months, so if you thought the ‘long hot summer of crazy’ was fun, just look forward to how nutty things get during the looming ‘winter of discontent.’”