TOPICS > Economy

Dismal Unemployment Report Suggests Recovery May Be Stalling

July 8, 2011 at 12:00 AM EDT
The U.S. unemployment rate rose to 9.2 percent in June as employers added the fewest jobs in nine months. Jeffrey Brown discusses the grim jobs reading and the stubbornly high employment gap between black and white Americans with Pomona College's Cecilia Conrad and Mesirow Financial's Diane Swonk.
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JEFFREY BROWN: Americans seeking work and many hoping to hold on to their jobs found little to cheer about in June. New numbers from the government today showed unemployment rising again and job creation stagnating.

PRESIDENT BARACK OBAMA: And today’s jobs report confirms what most Americans already know: We still have a long way to go and a lot of work to do to give people the security and opportunity that they deserve.

JEFFREY BROWN: President Obama delivered that summation in the White House Rose Garden. As he acknowledged, the June jobs picture was anything but rosy.

The Labor Department reported unemployment hit 9.2 percent, up a tenth-of-a-point and the third straight increase. And the economy had a net gain of just 18,000 jobs, the smallest total in nine months.

The president argued there had been some progress, but perhaps even more than in the past, he conceded that job growth remains far too slow.

BARACK OBAMA: We’ve added more than two million new private sector jobs over the past 16 months. But our economy as a whole just isn’t producing nearly enough jobs for everybody who’s looking.

JEFFREY BROWN: In fact, it takes at least 125,000 new jobs a month just to match population growth. And Republican House Speaker John Boehner insisted the blame for falling so short on that target lies squarely with the administration.

REP. JOHN BOEHNER, R-Ohio speaker of the House: I’m sure the American people are still asking the question, where are the jobs? The stimulus spending binge, excessive government regulations and our overwhelming debt continue to hold back job creators around our country.

JEFFREY BROWN: Private sector hiring accounts for most job creation, but it was anemic, at best, last month. Businesses added just 57,000 jobs. That was the smallest increase in more than a year, and much of it was offset by a loss of 39,000 government jobs.

All told, 238,000 teachers and civil servants have lost their positions over the last eight months, as state and local government revenues shrink. In addition, unemployment among minorities remains far higher than among whites.

It’s all combining to put new pressure on the president and Congress. Both sides used today’s jobs report to make the case that it’s more urgent than ever to strike a deal on deficits and raise the federal debt ceiling.

REP. JOHN BOEHNER: We’re up against the debt limit. And while some think that, you know, we can go past August the 2nd, I frankly think it puts us in — in an awful lot of jeopardy and puts our economy in jeopardy, risking even more jobs.

BARACK OBAMA: The sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and to hire.

JEFFREY BROWN: The president also called again for Congress to extend a payroll tax cut and ratify trade agreements. White House economist Austan Goolsbee said those proposals and others would cut unemployment by a full point, to 8.2 percent, by next year’s presidential election.

And for a closer look at today’s numbers, we turn to Cecilia Conrad, an economist and dean of the faculty at Pomona College in California, and Diane Swonk, chief economist for Mesirow Financial, a Chicago-based firm.

Well, Diane Swonk, disappointment all around. What jumps out at you or surprises you most?

DIANE SWONK, Mesirow Financial Holdings, Inc.: Well, I think the magnitude of the losses in the state and local government sector. We’re continuing to see that as a headwind. It’s a headwind that will abate over the next year, but not soon enough to make a real difference in terms of the handoff to the private sector, which just hasn’t been there.

There is some good news, some light at the end of the tunnel that is not a train, and that is the fact that manufacturing is picking up, and not all of that was reflected in today’s data, and we will see more of it in July. That is some good news. We’re also seeing a lot of IPOs out there, and some of that will turn into job creation down the road.

But down the road is just too long to wait for all those who have been so long unemployed. The number of long-term unemployed in particular is disturbing. And the low rate of participation, the fact that people don’t even have enough hope to throw their hat in the ring and actually participate in looking for a job, is particularly disturbing right now.

JEFFREY BROWN: Well, Cecilia Conrad, how far do you take it? Do you see these anemic numbers as suggesting that whatever recovery was under way really has stalled?

CECILIA CONRAD, Pomona College: I think it has stalled.

And there — it — there are several pieces of evidence for that. First of all, when we think about the numbers, there’s evidence that we are seeing a falloff in temporary help. And temporary help is one of the ways in which a business might sort of put its toe in the water in terms of expanding employment if it has some optimism about the future.

The other things that’s disturbing, we have talked a bit about the government employment and the shrinkage in that sector, which is not entirely surprising, given the fact that the recovery — the stimulus package, which funneled some funds to help keep afloat the school districts and to keep teachers employed, has largely expired.

So you see evidence of that in a group that historically has not suffered as much. And that is looking at black women. Relative to black men, they have usually done fairly well in the labor market. But in the most recent segment, compared to June a year ago, their unemployment rate has actually gone up two percentage points.

And that’s a group that historically has had great a bit of employment in the government sector.

JEFFREY BROWN: Well, and staying with you, Cecilia, overall, the African-American unemployment is roughly double that of whites, 16-something percent to 8 percent. Now, why — why does that stay so stubbornly high?

CECILIA CONRAD: That’s a great question and a real puzzle, I think.

If you look over time, across recession, across economic recoveries and growth — periods of growth, it has rather stubbornly been a 2-1 ratio of the black unemployment rate to the white unemployment rate.

And if we think about the explanations traditionally given for why blacks have higher unemployment rates, we usually point to, first of all, differences in educational attainment. But, despite the fact that there are still gaps in educational attainment, over time, the educational attainment of blacks has improved, increased, and the gap between blacks and whites has narrowed.

We sometimes talk about the problem of spatial mismatch, that African-Americans remain more segregated than any other population in the country. They are frequently segregated in areas that do not have the jobs, that haven’t seen job growth. And they lack the kind of transportation infrastructure to get to where the jobs are.

However, over time, the amount of that segregation has also abated a bit.

JEFFREY BROWN: Well, let me — let…

CECILIA CONRAD: So — and then the third argument is just — oh, go ahead.

JEFFREY BROWN: No, no, I’m sorry. Go ahead.

CECILIA CONRAD: Go ahead.

JEFFREY BROWN: Well, I was going to ask — I was going to ask Diane Swonk to weigh in here, because the — you know, the — we talked — the numbers are the numbers, but they hit people in different ways.

So, what — what — what disturbing trends do you see fit into what Cecilia Conrad was just talking about?

DIANE SWONK: Well, certainly dovetailing on that, in terms of the unemployment rate among single heads of household that are women, that are women — single mothers, essentially — is running close to 13 percent, which is part of that problem where the African-American women have now become more unemployed with the loss in government jobs.

And the loss in educational employment, the loss of teachers, you think of robbing the human capital, the investment in human capital going forward, so you wonder about how much that is undermining us going forward. Also disturbing is the fact that teenagers’ unemployment is now close to 25 percent. That’s an area where they are not getting critical skills.

And it could exacerbate the gap between minorities and whites going forward, because, if they’re not getting critical job skills early on in life, they may not be as easy to reenter the labor force or enter the labor force later in life. So there’s a lot of things that are really disturbing out there.

And, furthermore, in the wake of financial crises, one of the things that we do know from other financial crises, particularly in Europe, is 20 years later, early crises in the 1990s, we never saw the lows in unemployment before the crises, and the lingering effects were low rates of labor participation and long-term unemployment structurally high.

And that’s 20 years out. And they did everything right to fix their financial crises, to structurally change their economies. And they weathered the recent financial crisis relatively well, had a V-shape recovery, and they still have — 20 years out, have not gotten to those pre-crisis lows on unemployment.

And that is something that is particularly disturbing, because we clearly don’t have the kinds of consensus that they had during those crises to fix the problem today in the United States.

JEFFREY BROWN: Well, Cecilia Conrad, first of all, I apologize. I didn’t mean to interrupt your last thought there.

JEFFREY BROWN: Please finish. But, you know, as a way of telling us, do you see any positives out there when you look either at particular sectors of the population or the long-term economic picture?

CECILIA CONRAD: The retail trade sector, yesterday, there was news about an uptick in sales, and that was one of the things that was rather disappointing in the numbers today, because it didn’t seem to play itself out in terms of job growth.

But that is a sector that is sometimes the first job, the entry-level job that Diane referred to as being critically important for young people and for teenagers.

The other sector that had a little bit of light was leisure and travel. And that is an interesting one because it is surprising, given the economic circumstances, that there is a growth in demand there, but that actually may be coming from foreign visitors, as much as domestic visitors. So there is a little bit of light, but not a lot of light.

JEFFREY BROWN: All right, we will leave it there then.

Cecilia Conrad, Diane Swonk, we will look for a little bit of light. Thank you both. Thank you very much.

DIANE SWONK: Thank you.

CECILIA CONRAD: Thank you.