June 17, 2013

Better Solutions for More Jobs in Our Jobless Recovery

Keith Hall

Senior Research Fellow
Summary

Regarding Alan Blinder's "Fiscal Fixes for the Jobless Recovery" (June 11): Prof. Blinder is absolutely right that there is an unfortunate air of complacency in Washington about job creation. The seemingly low 7.6% unemployment rate is masking an extremely low employment rate of just 58.6%—about the same as midyear 2009. At our current pace, we are a decade away from a full labor market recovery. Where he is wrong, however, is putting the blame on a lack of growth in government employment.

Regarding Alan Blinder's "Fiscal Fixes for the Jobless Recovery" (June 11): Prof. Blinder is absolutely right that there is an unfortunate air of complacency in Washington about job creation. The seemingly low 7.6% unemployment rate is masking an extremely low employment rate of just 58.6%—about the same as midyear 2009. At our current pace, we are a decade away from a full labor market recovery. Where he is wrong, however, is putting the blame on a lack of growth in government employment.

Fueled by the surge in government spending, total government employment hit a record high of 22.6 million in 2009—the same year the private sector lost five million jobs. Today, government accounts for 16.1% of total employment, the same as in 2007, before the start of the recession.

The biggest problem remains basic economic growth in the private sector. Over the past year, the private sector's portion of real GDP grew 2.7%. At this point during the past two "jobless" recoveries (following the 1991 and 2001 recessions), the private sector was growing 5.2% and 3.8%, respectively.

If you ask most small-business owners, our biggest job creators, what they see as their single most important problem, you get an amazing answer. According to a survey by the National Federation of Independent Business, the two most common answers are "taxes" and "government regulations and red tape." "Poor sales" comes in a distant third. Also, with all the recent talk of the need for government-funded job training, only 6% responded "quality of labor."

We should listen to small-business owners. There is a great deal of economic policy uncertainty in Washington that needs to be resolved.