market continues to weaken and to set records for severity
Payroll jobs increased by 126,000 in October.
While far preferable to further job losses, those job gains fall short
of the 150,000 jobs a month necessary to prevent the slack in the labor
market from worsening. Jobs remain 2.4 million below the level of March
2001 when the last recession began. This post-recession labor slump has
now become the first (since the collection of monthly jobs data began
in 1939) without a full recovery of jobs within 31 months of the start
of a recession.
of losing jobs over the last two and a half years, the economy should
have added 4.5 million jobs just to keep up with growth in the working-age
population. Actual job losses instead of needed job gains have created
a total gap of 6.9 million jobs.
labor slump has caused many people to give up on finding a job and created
a “missing” labor force of 2.1 million. If added to the 8.8
million officially unemployed, the “missing” labor force would
raise the unemployment rate to 7.3%.
labor market has also brought an unprecedented 1.2% decline in total real
wage and salary income over the last two and a half years. Americans today
would have $61 billion more to spend today if their wages and salaries
had kept pace with inflation and $346 billion more if their pay had kept
up with the value of their output.
details on the severity of the current labor slump, see the new EPI Briefing
Paper, The Severity of the Current Labor Slump, to be posted after
2:00 P.M. on Nov. 7.
Administration’s tax cuts falling short in job creation
The Bush Administration called the tax cut package, which took effect
in July 2003, its “Jobs and Growth Plan.” The president’s
economics staff, the Council of Economic Advisers (see background
documents), projected that the plan would raise the level of growth
enough to create 5.5 million jobs by the end of 2004—306,000 new
jobs each month, starting in June 2003. Last month, October 2003, the
jobs and growth plan fell 180,000 jobs short of the administration’s
projection. The cumulative shortfall since June 2003—the amount
by which the projected jobs exceeded actual job growth—is now 995,000.
an image above to enlarge]
employment contraction since the Great Depression
Since the recession began 31 months ago in March 2001, 2.4 million
jobs have disappeared, a 1.8% contraction. This is the first time since
the Great Depression that jobs have failed to fully recover within 31
months of the start of a recession. The picture is bleaker for private
sector jobs, which have dropped by 2.9 million since March 2001, a 2.6%
contraction. (See State data and organizations
for more information on your state.)
official end of the recession in November 2001, total jobs have shrunk
by 0.8 million (an 0.6% contraction) and private sector jobs have dropped
by 0.9 million (or 0.8%).
On October 21, The New York Times reported that Treasury Secretary
John Snow projected that the economy will generate two million additional
jobs, about 200,000 per month, before next years election. This
new number is a huge retreat from the administrations previous projection
made when it was selling its tax cuts. In February the Council of Economic
Advisers projected 306,000 per month job growth starting in mid-2003 if
the tax cuts were passed and roughly 228,000 jobs created per month without
the tax cuts.
job creation of 200,000 and maintaining unemployment at its current level
is far from a satisfactory economic performance. It takes monthly gains
of about 150,000 payroll jobs and 155,000 in household employment just
to keep the gap in jobs since March 2001 from widening further. Even with
job gains of 306,000 a month, as promised by the Administration early
this year, it would take more than four years to close the jobs gap that
two and a half years of job losses have created.
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© 2003 by The Economic Policy Institute. All rights reserved.