Economy: It all comes down to jobs
WASHINGTON — Unemployment has been stuck near 9 percent since the recession ended more than two years ago. The jobs report for September on Friday sent the clearest signal to date that the crisis will last through next year's elections.
The nation added 103,000 jobs in September, an improvement from the month before, the Labor Department said Friday. However the total includes 45,000 Verizon workers who were rehired after going on strike and were counted as job gains.
Even setting aside that technicality, the job gains weren't enough to get the economy out of its soft patch. It takes about 125,000 jobs a month just to keep up with population growth. For September, the unemployment rate stayed stuck at 9.1 percent.
The pain isn't confined to the 14 million officially unemployed Americans. Among those hurt are people forced to work only part time and those who've given up looking for work in frustration.
Count many people with jobs, too. Their pay, home values and employment prospects have been diminished by the lack of good-paying, full-time work. Include, too, communities where services have been slashed, small businesses struggling with weak sales and young adults who can't find jobs to repay student loans.
The ailing job market is both a symptom and a cause of troubles elsewhere in the economy — from a depressed housing market to cash-short governments to sluggish consumer spending.
Here's a look at the wide-ranging consequences of chronically weak job growth.
WAGES: A crippled labor market shifts bargaining power to employers. Workers have little leverage to seek raises. When adjusted for inflation, pay was nearly 2 percent less in August than it was a year earlier, according to the Labor Department.
"People are much more compliant and willing to take extra work assignments because they're afraid," says Carl Van Horn of Rutgers University's Center for Workforce Development.
GOVERNMENT BUDGETS: High unemployment squeezes government finances in at least two ways. Lost jobs mean governments collect less tax revenue. And they have to spend more on unemployment benefits, food stamps and other social programs.
The federal government's tax collections this year are expected to fall to the lowest level since 1950 as a percentage of the economy. More than 40 million Americans — a record 1 in 8 — are receiving food stamps.
If the economy were strong enough to reduce unemployment to a healthy 5.2 percent, next year's federal budget deficit would be one-third lower than forecast, the Congressional Budget Office said this week.
Worst off are local governments. They've been cutting services and jobs for the past two years. Over the past 12 months, localities have slashed 210,000 jobs.
YOUNG PEOPLE: Breaking into the job market is increasingly hard for high school and college graduates. Businesses aren't creating many jobs. And workers who have jobs are holding on to them. That leaves young people with few openings to apply for.
To find work, new college graduates have to settle for lower pay and jobs that don't require a bachelor's degree. That's painful for those who took on big debts to pay for their college education.
College grads hired in 2009 and 2010 earned 10 percent less than those who found jobs in 2006 and 2007, before the Great Recession, the Rutgers researchers found.
And economist Lisa Kahn of Yale University found that young people who graduate in a poor economy will still be saddled with lower wages 15 years later.
THE UNDEREMPLOYED AND THE HOPELESS: In September, nearly 9.3 million Americans had to settle for part-time work even though they wanted full-time jobs. That was up 440,000 from August. An additional 2.5 million want to work but have given up looking. Add those part-timers to the work force dropouts and the unemployed and nearly 26 million, or 16.5 percent, of working-age Americans want full-time work and can't find it.
BABY BOOMERS: Boomers are less likely to lose their jobs than younger workers. But when they do, they have a tougher time finding new ones. Would-be employers tend to choose younger, cheaper applicants. Some fear that older workers will bolt for a better-paying job once they can.
In a survey of the unemployed, the Rutgers researchers found that 80 percent of those older than 50 have been out of work for more than a year. And half have been unemployed at least a year.
Many have drained their retirement savings and lack health insurance. Nearly half plan to apply for Social Security benefits earlier than they had intended to.
SMALL BUSINESSES: Unemployment, job insecurity and dwindling wages are preventing consumers from spending freely. Many big companies can turn to fast-growing markets overseas to compensate for slumping U.S. sales. But most small businesses can't.
Small companies surveyed by the National Federation of Independent Business have cited weak sales, rather than perennial gripes such as high taxes and burdensome regulations, as their No. 1 problem.
HOUSING: The unemployment crisis is helping depress the housing market. Many homeowners owe more on their mortgages than their houses are worth. Others can't afford to sell their homes and trade up to new ones. And a backlog of foreclosed homes is keeping supplies high and prices low. Not even record-low mortgage rates have helped.
Analysts say that housing won't recover as long as unemployment remains stuck at recession levels.
Sales won't pick up until Americans are confident enough in their job prospects — and have the wages to support a down payment — to consider buying a house.
"It used to be that housing led the recovery, and jobs would come after," says Lisa Ann Sturtevant, a public policy professor at George Mason University. "It has to go the other way now. The jobs have to come first."
So far, they aren't coming fast enough to make a difference.