Unemployment stuck at high level of 5.6%; underemployment higher than at recovery's start
After a few months of healthy job growth, employment grew by just 112,000 jobs in June 2004. The employment growth that began in September 2003 has not been vigorous enough to reduce unemployment, which has remained at 5.6% since January 2004, the same rate as when the recovery began in November 2001 and far higher than the 4.2% levelwhen the recession began in March 2001. Unfortunately, underemployment in the form of involuntary part-time work, discouraged workers, and other marginally attached workers (i.e., those who have looked for work in the last year but are not counted as unemployed) has increased. Specifically, the total underemployment rate was 9.6% in June 2004, up from 9.4% in November 2001 when the recovery began, and far higher than the 7.3% in March 2001 when the recession began.
One year later, Bush Administration's tax cuts not fulfilling job creation promises
The Bush Administration called the tax cut package, which was passed in May 2003 and 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 result in the creation of 5.5 million jobs by the end of 2004—306,000 new jobs each month, starting in July 2003. The CEA projected that, starting in July 2003, the economy would generate 228,000 jobs a month without a tax cut and 306,000 jobs a month with the tax cut. Thus, it projected that 3,672,000 would be created over these last 12 months, the first year after the tax cuts took effect. In fact, since the tax cuts took effect, there are 2,230,000 fewer jobs than the administration projected would be created by enactment of its tax cuts. As can be seen in the chart below, job creation failed to meet the administration's projections in 10 of the past 12 months.
Greatest sustained job loss since the Great Depression
Since the recession began 39 months ago in March 2001, 1.2 million jobs have disappeared, representing a 0.9% contraction. The Bureau of Labor Statistics began collecting monthly jobs data in 1939 (at the end of the Great Depression). In every previous episode of recession and job decline since 1939, the number of jobs had fully recovered to above the pre-recession peak within 31 months of the start of the recession. Today's labor market would have 5.4 million more jobs if employment had grown by the same 3.0% average that characterized the last three recession cycles. There have been larger job losses for the private sector than the overall labor market, with that sector having dropped by 1.8 million since March 2001, representing a 1.6% contraction. (See state data and organizations for more information on individual states.)
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© 2004 by The Economic Policy Institute. All rights reserved.