The Jobs Picture Still Looks Bleak

Many outsourced jobs will never return, and median
income will likely continue to fall just like it did during the last
so-called recovery.

From the Wall Street Journal | April 12, 2010 By ROBERT
REICH

The U.S. economy added 162,000 jobs in
March. That sounds impressive until you look more closely. At least a
third of them were temporary government hires to take the census-better
than no job but hardly worth writing home about. The 112,000 real new
jobs were fewer than the 150,000 needed to keep up with the growth of
the U.S. population. It's far better than it was-we're not hemorrhaging
jobs as we did in 2008 and 2009-but the bleeding hasn't stopped.

Since the start of the Great Recession in December 2007, the economy
has shed 8.4 million jobs and failed to create another 2.7 million
required by an ever-larger pool of potential workers. That leaves us
more than 11 million jobs behind. (The number is worse if you include
everyone working part-time who'd rather it be full-time, those working
full-time at fewer hours, and people who are overqualified for the jobs
they're in.) This means even if we enjoy a vigorous recovery that
produces, say, 300,000 net new jobs a month, we could be looking at five
to eight years before catching up to where we were before the recession
began.

Given how many Americans are unemployed or underemployed, it's hard
to see where we get sufficient demand to support a vigorous recovery.
Outlays from the federal stimulus have already passed their peak, and
the Federal Reserve won't keep interest rates near zero for very long.
Although consumers are beginning to come out of their holes, it will be
many years before they can return to their pre-recession levels of
spending. Most households rely on two wage earners, of whom at least one
is now likely to be unemployed, underemployed or in danger of losing a
job. And even households whose incomes have returned are likely to be
residing in houses whose values haven't-which means they can't turn
their homes into cash machines as they did before the recession.

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Martin Kozlowski 

While
consumers have been shedding their debts like mad-often simply by
defaulting on loans-their remaining burdens are still heavy. At the end
of last year, debt averaged $43,874 per American, or about 122% of
annual disposable income. Most analysts believe a sustainable debt load
is around 100% of disposable income, assuming a normal level of
employment and normal access to credit-neither of which we are likely to
have for some time.

Some economic cheerleaders say rising stock prices are making
consumers feel wealthier and therefore readier to spend. But most
Americans' biggest asset is their homes. The "wealth effect" is felt
mainly by the richest 10%, whose net worth is largely stocks and bonds.
The top 10% accounted for about half of total national income in 2007.
But they were only about 40% of total spending. A vigorous jobs recovery
can't be based on 40% of what was spent before the economy collapsed.

What's likely to slow the jobs recovery most, however, is the
indubitable reality that many of the jobs that have been lost will never
return.

The Great Recession has accelerated a structural shift in the economy
that had been slowly building for years. Companies have used the
downturn to aggressively trim payrolls, making cuts they've been
reluctant to make before. Outsourcing abroad has increased dramatically.
Companies have discovered that new software and computer technologies
have made many workers in Asia and Latin America almost as productive as
Americans, and that the Internet allows far more work to be efficiently
moved to another country without loss of control.

Companies have also cut costs by substituting more computerized
equipment for labor. They've made greater use of numerically controlled
machine tools, robotics and a wide range of office software.

These cost-cutting moves have allowed many companies to show profits
notwithstanding relatively poor sales. Alcoa, for example, had $1.5
billion in cash at the end of last year, double what it had on hand at
the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of
its work force. But for workers, there's no return. Those who have lost
their jobs to foreign outsourcing or labor-replacing technologies are
unlikely ever to get them back. And they have little hope of finding new
jobs that pay as well. More than 40% of today's unemployed have been
without work for over six months, a higher proportion than at any time
in 60 years.

The only way many of today's jobless are likely to retain their jobs
or get new ones is by settling for much lower wages and benefits. The
official unemployment numbers hide the extent to which American workers
are already on this downward path. But if you look at income data you'll
see the drop.

Among those with jobs, more and more have accepted lower pay and
benefits as a condition for keeping them. Or they have lost
higher-paying jobs and are now in new ones that pay less. Or new hires
are paid far lower wages than the old. (In January, Ford Motor Co.
announced that it would add 1,200 jobs at its Chicago assembly plant but
didn't trumpet that the new workers will be paid half of what current
workers were paid when they began.) Or they have become consultants or
temporary workers whose pay is unsteady and benefits nonexistent.

This shift also helps explain why the
unemployment rate for Americans with college degrees is now only 5%,
while it is 10.5% for those with only a high-school degree, and 15.6%
for Americans with less than a high-school diploma. The jobs of
well-educated Americans, although hardly immune to foreign outsourcing
and technological displacement, have been less vulnerable to these
trends than the jobs of Americans with fewer years of education.

The likelihood, therefore, is that as the economy struggles to
recover and today's jobless begin to find work, the median wage will
continue to fall-as it did between 2001 and 2007, during the last
so-called recovery.

More Americans will be working, but for pay they consider inadequate.
The approaching recovery will be tepid because so many people will lack
the money needed to buy all the goods and services the economy can
produce.

Americans will once again be employed, but they will also be back on
the downward escalator of declining pay they rode before the Great
Recession.

Mr. Reich, professor of public policy at the University of
California at Berkeley and former secretary of labor under President
Clinton, is author of the forthcoming "Aftershock: The Next Economy and
America's Future" (Alfred A. Knopf).