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Editorial
Unemployment Rising


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Published: April 4, 2009

For much of last week, it was possible to think that the economy was looking up. Various indicators, though weak, were not as bad as expected. The disappointing results from the Group of 20 meeting in London were offset in part by the leaders’ display of seriousness and, in particular, President Obama’s debut on the world stage.

On Friday, reality bit back with the news that the unemployment rate spiked in March, to 8.5 percent, a 25-year high. The government’s report also showed that employers had shed 663,000 more jobs in March. Nearly two million jobs have vanished this year — 5.1 million since the recession began in December 2007. The ranks of the unemployed now stand at 13.2 million.

There is no longer any doubt that the current recession will be the longest yet in America since World War II. The previous record-holders — the contractions of the early 1970s and the early 1980s — each lasted for 16 months. As of now, the economy already has been in decline for 16 straight months.

The questions now are how much longer the recession will be and how much worse it will get. Measured by the labor market, the answer to both questions is “a lot.” That is because employers will continue to cut jobs as long as the economy is weakening and will resume hiring only once they are sure a recovery is under way. In this recession, the traditional paths to recovery are especially blocked. Economic rebounds — especially from steep declines — are generally led by recovery in the housing market. This time, housing is unlikely to provide the spark. By prudent estimates, housing sales and prices will not begin to turn up appreciably until 2010 at the earliest.

Economic rebounds are also marked by recovery in the sales of big-ticket items and by a resurgence in exports, both of which are traditionally dominated by automobiles. Consumers and the auto industry alike are too devastated, however, for automobiles to spur recovery anytime soon, either in terms of sales or employment.

In the stimulus bill passed in February, the Obama administration got off to a good start in combating the ravages of unemployment, mainly by bolstering unemployment benefits and health care coverage for the jobless. It is painfully clear, however, that the law’s potential to create or save a few million jobs will not be enough to combat the current scale of unemployment.

More fiscal stimulus will be needed to support more demand and, in turn, more jobs. At the same time, the administration’s early promise to champion middle-class issues and a progressive labor agenda must be realized, rather than eclipsed, as appears to be the case at present. Goals like stronger unions will not change the quality of workers’ economic life overnight, but moving toward them, starting now, will help to renew the hope that proved so fleeting this week.

IPOD

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