The U.S. recession officially ended in June 2009, but mostly it's been a weak recovery, with the size of the economy barely bigger today than it was four years ago, when the recession started.
Since America is a rich country, it is not growth itself that matters most but employment and, of course, the distribution of income. And the employment numbers are just terrible.
The simplest measure is the percentage of the working-age population that is employed. That peaked at 63.4 percent in December 2006. It plummeted to a low of 58.2 percent last July and is hardly different now — 58.5 percent in the latest figures. What this means is that we need about 10 million jobs to get back to full employment.
There was a lot of happy talk earlier this month when the December job numbers were released. They showed 200,000 payroll jobs added in December, and the unemployment rate falling to 8.5 percent. Adding even 200,000 jobs a month is not very good for an economy that needs at least 90,000-100,000 jobs a month just to keep up with the growth of the working-age population.
And as my colleague Dean Baker pointed out, the latest jobs numbers have probably been over-optimistic. Realistically, he notes, at present trends of job growth we will not hit full employment until 2028. This would be a failure of disastrous proportions.
Looking at it from the unemployment side, the U.S. government has a broader measure of unemployment that includes people who are involuntarily working part-time or who have given up looking for work. This is at 15.2 percent of the labor force, or 23.7 million people who need work.
To make matters worse, we have had record numbers out of work for more than six months — more than 40 percent of the unemployed over the last two years. Recent research shows that even this measure underestimates the current long-term hardship in the labor market.
The most likely scenario is slow growth with intolerable levels of unemployment, along with rising poverty and inequality, and accompanying social ills.
There are many things that the government could do to restore full employment.
The Obama administration's 2009 Recovery Act, or stimulus, saved an estimated 1.2 million to 2.8 million jobs — not nearly enough. Obviously a much bigger stimulus, and one more focused on creating employment, is needed — but politicians are afraid to talk about it. And the likely Republican presidential candidate, Mitt Romney, promises to create much more unemployment through massive federal budget cuts.
Another way to reduce unemployment would be for the government to subsidize and encourage employers to allow for shorter hours, as an alternative to laying people off. Unemployment insurance funds, along with other money, could be used for this purpose. This has proved very successful in Germany, where unemployment is at 5.5 percent — lower than it was before the world recession.
Of course, so long as our political discussion is fixated on a non-existing "threat" from the federal debt, these solutions will be out of reach. The current net interest burden on the federal debt is 1.4 percent of GDP, about as low as it has been for more than 60 years. The biggest burden we are carrying is the economic illiteracy of our leaders, for which Americans are paying a very steep price.
Weisbrot is the co-director of the Center for Economic and Policy Research; Web site: www.cepr.net.