Job growth stalls in last two months, underlining failure of tax cuts as job creation strategy
Job growth has stalled in the last two months. Payroll jobs increased by only 78,000 in June and a meager 32,000 in July, after rising 295,000 a month the previous three months. 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 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 3,978,000 jobs would be created over the last 13 months. In reality, since the tax cuts took effect, there are 2,565,000 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 11 of the past 13 months.
Pay suffers as displaced worker rate climbs to highest on record
The latest survey on worker displacement confirms just how bleak the labor market has been in the last three years. The Bureau of Labor Statistics just released the results from the biennial survey conducted in January 2004. The survey asks adult workers permanently displaced from their jobs in the last three years about their subsequent labor market experience. The latest survey, concerning job displacements in 2001-03 among those with at least three years of tenure at their previous job, found that a higher share of such workers (6.3%) had been displaced in those three years than in any previous survey. Although the rate of displacement was almost as high in the early 1980s and early 1990s, those periods were marked by much higher unemployment rates. The latest survey also found that almost two-thirds of displaced workers had taken another job at lower pay (30%) or remained jobless (35%).
Perhaps most striking is the contrast between pay in the lost jobs versus pay in the new jobs. For those lucky enough to land a new full-time job, the median pay rate fell from $681 per week in their old job to $572 per week in their new job. As shown in the figure above, that 16% difference in weekly pay far exceeds the gap of recent years and matches the gap during the "jobless recovery" of the early 1990s.
Greatest sustained job loss since the Great Depression
Since the recession began 40 months ago in March 2001, 1.2 million jobs have disappeared, representing a 0.9% contraction. To put this performance in historical perspective, 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 6.2 million more jobs if employment had grown by the same 3.7% average that characterized the last three recession cycles. As for who has been hurt most, private-sector jobs have fared worse than public-sector jobs. Jobs in the private sector have dropped by 1.8 million since March 2001, representing a 1.6% contraction.
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