Secretary Elaine Chao


How to Get America Back to Work

There was little to cheer in Friday’s unemployment report, other than the fact that there have been worse in the past year. But the unemployment figures are not going to get much better unless and until policymakers in Washington acknowledge that jobs lost do not automatically bounce back—especially not in the face of a still-tight credit market and actions in Washington that, however well-intentioned, would dissuade the hiring of new workers.

No one feels that more keenly right now than America’s 15 million unemployed workers, who have been without a job, on average, for 29 weeks—the longest since that data began being collected in 1948. In normal times, laid-off workers are unemployed an average of eight weeks. Today the future looks so bleak to so many unemployed workers that in December alone, 661,000 lost hope and gave up looking for a job. The labor force participation rate dropped to 64.6 percent from 65.2 percent from the previous month. Nearly 2 million workers have given up looking for jobs since May. Because they have effectively dropped out of the work force as measured by the Bureau of Labor Statistics, they are not reflected in the official unemployment rate, currently listed as 10 percent.

A year ago, the chairman of the Council of Economic Advisers promised that passing the trillion-dollar stimulus package would keep the unemployment rate from rising above 8 percent—through the next five years. Obviously, that prediction has not panned out. While job losses per month may be lessening, there is a stunning dearth of new job creation. The unemployment rate soared in the first quarter of 2009 compared to the last quarter of 2008, even though 53,000 fewer jobs were lost. Unemployment skyrocketed in the first three months of 2009 because job creation tanked—nearly 1 million fewer jobs were created than in the last quarter of 2008. This lack of job creation is a phenomenon that distinguishes this period from other economic downturns.

In the best of years, millions of jobs are lost. Even when America’s economy has been by all measures healthy and the unemployment rate low, some businesses suffer or fail and lay off workers. But nearly always a simultaneous and even greater burst of new jobs has been created to offset the jobs lost—millions of new jobs every year. Enough to provide jobs for those who have been laid off, as well as for new entrants like high-school and college graduates into our work force.

Just to keep up with population growth, the economy needs to create about 125,000 new jobs a month. Shortly after Friday’s disappointing report that 85,000 more workers lost their jobs in December, the White House announced that 17,000 “green” jobs would “likely” result from $2.3 billion in tax credits for the manufacture of wind and solar power equipment and batteries. That’s positive news, but it illustrates what a relatively tiny impact even billions of dollars of government spending to favored sectors makes in terms of job creation. Furthermore, Spain is considered the leader in trying to stimulate the creation of green jobs. Its unemployment rate ranks among the highest in the world, at 19.3 percent.

Meanwhile, all that private-sector employers see on the horizon are higher taxes, higher employment costs, more federal mandates, more punitive bureaucracies, and gigantic federal deficits that crowd out private-sector capital. Employers are not hiring because they fear that all these conditions will diminish their ability to maintain sufficient financial resources with which to hire more workers. In fact, just the specter of these increased costs has deterred increased hiring in the private sector.

This is not a road map for robust economic recovery.

America’s unemployed need a timeout on government actions that increase the burdens on the private sector and impede hiring. The economic shock of higher taxes needs to be avoided by not letting the 2001 and 2003 tax cuts expire this year. Unspent stimulus funds should be redirected to advance the broad-based tax incentives that promote expanding and launching private-sector enterprises. And we need to push for trade agreements that open new markets for American exports.

Much can still be done to promote across-the-board job creation. But Washington policymakers have to understand the adverse implications of their actions on job creation, a goal they profess to desire, and they must reorder some of their priorities.