With our nation's unemployment rate moving in the wrong direction, it is high time President Barack Obama stops treating this crisis as merely a “bump in the road.”
He needs to see it for what it really is: a serious and escalating threat to the nation's economic recovery, which, after two years, is tenuous at best.
The U.S. labor market added only 54,000 jobs last month, the fewest since September and much lower than the 125,000 gain expected by Wall Street economists. As a result, the unemployment rate inched up to 9.1% in May, from 9% in April, according to the Labor Department.
About 14 million Americans are unemployed. That figure does not include those who simply have given up trying to find jobs, or those who are underemployed.
Taking that into account, the “underemployment rate” stands at a stunning 19.1%, according to figures released by The Gallup Organization.
Even more disturbing than the depth of unemployment is its duration. The average unemployed person in May had been out of work for 39.7 weeks. That's the longest since records began in 1948, according to the Labor Department.
The longer an individual is out of work, the more likely he or she will become obsolete and unable to re-enter the work force at the same level they were at when they lost their jobs.
Prolonged unemployment leads to higher “structural unemployment,” which is a fancy phrase to describe a mismatch between the needs of employers and the skills and training of potential workers.
In fact, the prospect of a prolonged slowdown in hiring poses the biggest single threat to the U.S. recovery, according to 54 economists in the latest Wall Street Journal economic forecasting survey, published last week.
U.S. unemployment is not a bump in the road. It's a serious obstacle, one that threatens to upend the nation's fragile economic recovery.
“Unemployment is the No. 1 economic issue right now,” Michael Feroli, the chief U.S. economist at JPMorgan Chase & Co., told the InvestmentNews editorial board last week. “It's actually been the No. 1 economic issue for a couple of years now.”
Mr. Feroli is absolutely correct.
In terms of priorities, unemployment trumps declining home values, escalating gasoline prices and the prospect of inflation. It even trumps the ballooning federal budget deficit, although no one would ever know it with all the chest thumping and political posturing coming from both sides of the aisle on Capitol Hill.
To be sure, another extension of unemployment benefits will not solve the jobs crisis. Besides exacerbating the strain on federal and state budgets, the continuous payout of those benefits will only create a permanent underclass — much like it has done in many parts of Europe.
Government, the private sector and labor must work together to get us through this crisis. The President's Jobs and Competitiveness Council, which met last week in North Carolina with Mr. Obama, represents a so-so start at bringing the three groups together. The council last week unveiled a ho-hum list of interim recomendations, focused on such areas as skills and training, regulatory reform and innovation.
Our main problem with the council, however, is that small businesses are sorely underrepresented among its membership. Surely, the perspectives of small business owners should figure prominently in any plan to tackle unemployment.
Solving the unemployment crisis will not be easy. Besides looking at ways to easy regulatory obstacles that are impeding growth of businesses in the U.S., lawmakers should seriously consider offering targeted tax breaks to employers that hire more workers than they lay off.
One way of doing that is to offer tax cuts to employers that commit to work-share programs. Under such programs, employers cut workers' hours — rather than laying them off — and the states make up a portion of the workers' lost wages with unemployment insurance programs.
Such programs do work. In fact, they are credited with getting Germany through the Great Recession with relatively few job losses.
Finally, no effort to reinvigorate hiring should overlook small businesses. Businesses with fewer than 20 employees — which would include the majority of advisory firms — accounted for 40% of the job growth that took place in the last economic expansion, from 2003 to 2007, according to some estimates.
A way of encouraging small businesses to grow is to empower the Small Business Administration to provide more credit to well-qualified loan applicants and to streamline the process for obtaining those loans.
It's evident that high unemployment poses a clear and present danger to the economic recovery of this country.
It's up to the White House, as well our leaders in Congress, to work with businesses, big and small, to fix this mess.
If they don't, this recovery is headed for a breakdown.