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Reich writes: "The fact that America's labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

Jobs Deficit Still More Important Than Budget Deficit

By Robert Reich, Robert Reich's Blog

04 February 12


he most significant aspect of January's jobs report is political. The fact that America's labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force.

President Obama's only chance for rebutting Republican claims that he's responsible for a bad economy is to point to a positive trend. Voters respond to economic trends as much as they respond to absolute levels of economic activity. Under ordinary circumstances January's unemployment rate of 8.3 percent would be terrible. But compared to September's 9.1 percent, it looks quite good. And the trend line - 9 percent in October, 8.6 percent in November, 8.5 percent in December, and now 8.3 percent - is enough to make Democrats gleeful.

But the U.S. labor market is far from healthy. America's job deficit is still mammoth. Our working-age population has grown by nearly 10 million since the recession officially began in December 2007 but many of these people never entered the workforce. Millions of others are still too discouraged to look for work.

The most direct way of measuring the jobs deficit is to look at the share of the working-age population in jobs. Before the recession, 63.3 percent of working-age Americans had jobs. That employment-to-population ratio reached a low last summer of 58.2 percent. Now it's 58.5 percent. That's better than it was, but not by much. The trend line here isn't quite as encouraging.

Given how many people have lost their jobs and how much larger the total working-age population is now, we've got a long road ahead. At January's rate of job gains - 243,000 - the nation wouldn't return to full employment for another seven years.

When they're not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America's jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can't possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. State and local budgets are still being slashed. The federal government is scheduled to begin major spending cuts less than a year from now. Republicans are calling for more cuts in the short term. Austerity economics continues to gain traction.

Meanwhile Congress is debating whether to renew extended unemployment benefits. This should be a no-brainer. The long-term unemployed, who have been jobless for more than six months, comprise a growing share of the unemployed. (In January they rose from 42.5 percent to 42.9 percent).

Republicans say unemployment benefits are prolonging unemployment, that people won't get jobs if they get unemployment checks from the government. That's claptrap, especially when there's only 1 job opening for every 4 people who need a job. Republicans also say we can't afford to extend jobless benefits. Also untrue. Jobless workers spend whatever money they get, and their spending keeps other people in jobs.

Government should extend unemployment benefits, and not cut spending until the nation's rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.

The job situation is better than it was but it's still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on and iTunes. your social media marketing partner


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+11 # anntares 2012-02-04 12:34
Qatar takes profits from oil and spreads them around to citizens. I wonder if the US will need to do that with profits of automated or offshored companies. Not our. Puritan style of respecting those who work hard, but if technology replaces jobs...?
+22 # Virginia 2012-02-04 12:59
Without home-life stability it's difficult to concentrate on finding a job. 12 million American families are devastated by foreclosure and eviction. Another 24 million are living day-to-day in fear that Gustapo-like eviction squads will raid their homes before dawn, throw them into the street and seize their belongings.  47% of Americans are one paycheck away from joining the 24 million.

Many of these folks ran companies that employed people, for example contractors, building material suppliers, property management companies, trucking, landscaping, etc.  A good majority of these people are 55 - 70 years old.  Baby Boomers that have lost their savings trying to keep their homes and their companies alive, because age has a lot to do with employment... and everybody has downsized and slashed salaries.

Talk about jobs is nothing more than ignorant political rhetoric when you fail to stabilize the home front. It's just more of the political mis-perceptions of the overall state of the economy. Stop the foreclosures and evictions. Keep people in their homes and remove the fear and depression. It's hard to get motivated to shower for work from your car or tent. Might as well move to Hawaii and get on welfare.
+20 # Chick Dante 2012-02-04 13:43
To borrow a phrase, the Republicans didn't cause the recovery. They just made it worse.
+4 # James Marcus 2012-02-04 13:44
We SO eagerly, and willingly, 'buy into' statistics for a pulse on what is going on.
In this 'Age of Media Manipulation', is any 'Agency Generated Information' reliable any more? Photo's, even?
What-you-see... is no longer what-you-get. It's a 'Digital Marvel' out there!
...and we are left to glean the Truth (in an Ocean of Self-Promoting Liars), like it or not, in ways as yet unestablished.. .....
+12 # jwb110 2012-02-04 14:08
I think that the country is making a hard left run and the Republicans are going to get pulled up short by this. If anyone took notice of the huge outcry regarding Komen Cure's removal of grants to Planned Parenthood and the turn around in less than 24 hours to reinstate the grants then you have some sense of how angry the population is. The people, and this includes all sides of the political spectrum, are sick and tired of the ideological rhetoric and they want ACTION. I personally think OWS has had a lot to do with this. Even if you do not ascribe to OWS philosophically you can't help but notice that it has been effective. I also think that the 99% finally understand that the one thing they have in common is not being heard. Certainly the GOP/TP primaries have reinforced that politics is out of touch with the citizens of the US and their needs. Super PACS or no Super PACS the deciding votes will be determined by how many wrinkles are in the voters stomachs.
+15 # reiverpacific 2012-02-04 14:21
It's nice that the Dem's are "gleeful", they already have nice jobs in office with lifetime pensions and top flight health coverage, even if don't get re-elected. The Repug's in office of course ditto -just looking for more power and ways to take what little is left from the rest of us. -But look what it takes just to run for office and then hang on to it, Ob's target of 1 Billion included! No wonder they don't live in the real world and end up believing in the statistics that are fed to them -and us- manipulated by "Consultants", PAC's, Lobbyists and the huge PR industry hanging on to their coattails.
An I love those who just say "get a job, they're out there"!
I dunno about you folks including some of the more reasonable Republicans I converse with betimes but I an officially a "senior", healthy and have worked all over the world and many parts of the US in my main field, including on two of the biggest global projects in Columbia and Indonesia in the 1980' and I can't even get an interview, after running my own practice for fifteen years, now defunct.
Hell, I'm willing to work as a cook (another skill) or anything now and am looking at starting a food cart but can't get a loan as my credit was destroyed by the ongoing depression (I don't care what the pundits call it!).
So it's not just working age people, it's young, elderly and often the most competent.
Not whining, just makin' a point which at least Reich seems to get.
+16 # giraffee2012 2012-02-04 14:24
GOP are conservatives selectively - and liberal selectively:

For example, they claim "conservative" when it comes to the deficit and when they claim the need to help USA people who through no fault of their own lose jobs or homes or cutting medical anything, social security, shipping jobs overseas, making the 1% pay at least the same % of income as poor/middle - ETC.

But they are very LIBERAL with their reasons for supporting a war and for exempting the 1% from paying "their fair share" claiming "job creators" -- even though the BIG $$ corporations are creating jobs NOT in USA. And they are very LIBERAL when accepting campaign money from a "person hood" of big $$ to buy our government and then turn around to pass laws to help the "person hoods" to increase their wealth.

Did anyone notice these corporations don't wear clothes, take baths or other bathroom duties, don't marry, can't be sued etc.

This "double speak" is only understood by 5 people who can change the outcome: Those 5 United States Supreme Court Justices who are sleeping with the Koch Brothers: Scalia/Thomas are at the top of the list.

Never ever vote GOP/TP but DO VOTE IN 2012 (while we still own the privilege of voting)
-1 # AndreM5 2012-02-06 12:17
You have a problem with your definitions of "liberal."
+9 # CreepingSocialist 2012-02-04 20:47
The like to see Prof. Reich part of the Obama Administration, as a recess appointment, of course. The president should, at least, always follow Reich's advice.
+5 # MicheleB 2012-02-05 09:41
"I can't even get an interview, after running my own practice for fifteen years, now defunct."

I hear you! Me: over 50 and unemployed for three years. During that time I have: taken on small consulting projects, made phone calls for a consulting firm to schedule appointments, done data entry, driven a bus for a conference 16 hours a day for 10 days, been a parking lot attendant, house, organized people's closets-sat and a few other things. I have moved in with a parent who is supporting me.

I have a graduate degree. And I have no job. I have taken unemployment and consider it my right to have -- I worked and my employer paid into the system for me for just such a circumstance. My short-term employers in the past few years have commented on my hard work and my work ethic, so I am clearly not a slouch. And I haven't received unemployment for the past two years anyway.

I don't know who these people are that the politicians seem to think don't want to work but I haven't met any of them. But I've met a lot of depressed and desperate 50+ year-olds.

Get real: this a depression.

Our politicians make millions of dollars, vote themselves raises and then dare to talk about "the middle class." I hope they all get struck with lightening if I hear them say one more time that austerity is the solution to our problems.
+1 # Hank 2012-02-05 11:11
Dr. Reich, what is the realistic minimum unemployment rate we can achieve?

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