As Jennifer has pointed out, the just-released employment figures are pretty dismal, with unemployment rising a tick to 9.8 percent and a significant rise in jobs lost, to 263,000 last month. This is, of course, bad news both for those who have lost their jobs and for the Obama administration. For while the economy is recovering from its winter lows (the job losses in January were a horrific 741,000) and many sectors are now growing, unemployment—always a lagging indicator—has been lagging more and more in the past two decades.
As a chart in a 2003 report by the New York Federal Reserve (scroll down to find Chart 1) shows clearly, job growth after the 1990-91 recession was much slower than the average of earlier recessions, a fact that contributed considerably to George H.W. Bush losing the White House a full year and a half after the recession had ended. The recession of 2001 was followed by even more dismal job growth–in fact it was job loss. There is no reason whatever to think that this recovery will not continue that trend.
Needless to say, the jobless recoveries after the recessions of 1990-91 and 2001 were blamed on Bush, père et fils, respectively. The mainstream media will be far more reluctant to blame Obama for this new jobless recovery, I’m sure. It should be noted, however, that the unemployment rate, 5.7 percent when the 2001 recession officially ended, remained steady and even rose as the recovery continued. It was at 6.1 percent in May 2003, when those dreadful Bush tax cuts for the rich were enacted. But then the unemployment rate immediately began to decline, falling as low as 4.4 percent and staying under 5 percent until March 2008. It was either the Bush tax cuts that ended the jobless recovery from the 2001 recession or it was a remarkable coincidence.
The underlying reason for increasingly jobless recoveries in recent decades can be found in Chart 5 of the New York Fed’s report. In the early 1980s, 51 percent of industries were undergoing structural change as opposed to merely cyclical change. By the 1990s, that percentage was 57. In 2003, it was fully 79 percent. It is undoubtedly even more now, six years later. The fact of the matter is that the microprocessor is remaking the economy from top to bottom—just as the steam engine did two centuries earlier—but it is doing so much faster. One result of this profound economic revolution is that productivity—the amount of output per unit of input—is rising quickly, and the largest input in most industries is labor. Thus the need to hire new workers as the economy begins to grow again is less and less urgent. It increasingly makes a lot more business sense to invest in new, highly productive equipment instead.
The unemployment rate fell below 5 percent in July 1997 and stayed below until September 2001 (it was actually at 3.9 percent in the last four months of 2000). If the Democrats allow the Bush tax cuts to expire in 2010, it’s going to be a very jobless recovery indeed.
Maybe the mainstream media won’t blame President Obama, but I suspect the voters will.