The U.S. Economy: Time for a Real Jobs Stimulus?

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Bettmann / Corbis

A Great Depression–era employment agency is crowded with men seeking work

If the recession is over, as some economists say, why are so many people still unemployed? The so-called jobless recovery is raising an intriguing question: Should America resurrect something like the Works Progress Administration (WPA) — the New Deal job-creation program that put millions of unemployed Americans to work building schools, roads, parks, libraries and other needed infrastructure projects during the Great Depression?

Indeed, the current situation is stark. When people say there are no jobs out there, it's true. According to the Bureau of Labor Statistics, at the start of the recession in December 2007, the ratio of job seekers to job openings was 1.5 to 1. Now six unemployed workers chase every available job. It's a brutal game of musical chairs in which a great many people lose and spiral downward economically with disastrous consequences, not only for themselves and their families, but also for communities that were once productive and prosperous.

The Obama Administration and economists hailed the dip in July unemployment to 9.4% from the 9.5% level in June as an indication that the economy is beginning to recover. But the drop in unemployment is deceptive. Employers shed another 155,000 jobs in July. And the unemployment rate would have gone up, possibly to 9.7%, if the 400,000 Americans who had previously been searching for a job (but became so discouraged they stopped) had continued to seek employment in July. Economists expect the job picture to remain bleak well into 2010.

The standard unemployment number excludes both those who have given up looking for a job and those who have taken part-time jobs but want full-time work. Include them and the number jumps to 20% or higher in states such as Michigan, California, Rhode Island and Oregon, with Tennessee, Nevada and other states in the high teens.

Economist Heidi Shierholz of the Economic Policy Institute says the economy has lost 6.7 million jobs since the beginning of the recession and that the stimulus bill thus far has generated 750,000 jobs. But in addition to the nearly 7 million jobs lost, the national economy has failed to add the 127,000 jobs per month needed to keep up with population growth. "The real employment hole is 9.1 million jobs," says Shierholz. "The stimulus bill is great, but it will only generate 3 to 4 million jobs. Now that we can see how dramatically things have deteriorated, we need to think about job creation in the places, like Michigan, that are extremely hard hit. There are areas across the nation that are going to be very depressed for a long time." (In comparison, at the height of the Great Depression, nearly 25% of the U.S. workforce — more than 11 million people — were unemployed.)

Why isn't the $787 billion stimulus bill helping unemployment? It was never designed to be a jobs program. Instead it is an ambitious policy prescription to restart — and redirect — the economy in new directions over the next three years. Stimulus spending is not a fast-infusion jobs program, nor is it always targeted toward the hardest-hit states. For example, stimulus road-building largely bypasses large metropolitan regions where antiquated infrastructure snarls traffic to focus on rural areas and smaller states.

Desperate times in one especially hard-hit Tennessee county stirred Governor Phil Bredesen to get creative. As first reported in the New York Times, the result is a "novel use of stimulus money." In remote, tiny Perry County, where the unemployment rate had soared to 27% with the closure of an auto-parts factory, Bredesen decided a New Deal–style WPA program was the order of the day. Some of the jobs are with the state parks and transportation department, but two-thirds of them are new jobs in private sector businesses — including a pie company, a hotel and a factory that needs painting and repair — which are reimbursed by the state for the salaries of the eligible stimulus workers. Some of the businesses say the free labor has helped expand their market share, and they are hopeful that they can grow enough to keep the larger workforce when government assistance stops in October 2010.

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