Years of High American Unemployment Ahead at Recovery's Pace

Despite the official end of the recession in June 2009, the labour market remains stagnant. Employment has fallen by nearly 7 million jobs since the recession began. Unemployment remains above 9 per cent. This is the weakest recovery of the post-World War II era. Current policies have not stimulated business hiring. If job creation occurs at the same rate as in the 2003-2007 expansion, unemployment will not return to prerecession levels until 2018. If job creation continues at the low rate of the past year, unemployment will remain permanently high. Congress needs to act to prevent this by removing federal barriers to business investment and success, says James Sherk, a senior policy analyst at the Heritage Foundation.

The Heritage Foundation used data from the Bureau of Labour Statistics to calculate how long, given certain levels of job creation, it would take unemployment to return to its natural rate.

  • If employers add an average of 260,000 net jobs per month – the rate the payroll survey showed during the late 1990s tech bubble – then unemployment will not return to its natural rate until August 2014.

  • If employers add 216,000 net new jobs per month – the rate the household survey showed in 1997, the year of the greatest job growth in the tech bubble – unemployment will return to its natural rate in October 2015.

    These are optimistic assumptions. The late 1990s was a period of unusually strong economic growth.

    Congress and the administration should take immediate action to encourage job creation. Such measures include:

  • Repealing the new health reform law and its associated employer mandates and tax increases.

  • Preventing the Environmental Protection Agency from regulating carbon dioxide.

  • Passing tort reform to reduce the cost of meritless lawsuits.

  • Expanding trade agreements.

  • Permitting more domestic energy production.

  • Reducing spending to mitigate the spectre of enormous tax increases.

    Source: James Sherk, Years of High Unemployment Ahead at Recovery's Pace, Heritage Foundation, July 5, 2011.

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    First published by the National Center for Policy Analysis, United States

    FMF Policy Bulletin/ 19 July 2011
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