Former Labor Secretary Robert Reich wrote something pretty startling the other day in the Wall Street Journal. Noting that since the start of the recession in 2007, the economy has lost 8.4 million jobs, and failed to create another 2.7 million jobs needed to accommodate growth in the job market, Reich indicated that even if the United States enjoys the kind of robust economy that creates a not-too-realistic 300,000 net new jobs per month, it still would take at least five years to catch up to where we were at the onset of the recession.
(In case you’re wondering about Reich’s math, he noted that the job-loss number is worse if you include people working part-time who would rather be full-time).
Nevertheless, his point is well taken. It’s going to be awhile before we fully recover in terms of job creation, which gives you an indication of just how much damage we’ve done to ourselves.
The most oft-cited monthly job-creation figure used to indicate the economy is keeping up with growth in the job market is 150,000 net new jobs per month. The March jobs number of 162,000 is not what it appears on the surface because about one-third of those are temporary Census jobs.
Although our political views aren’t exactly aligned, I’ve always thought of Reich as a reasonable and sensible man. The point he most often made as Labor Secretary was the importance of people taking their education (and on-the-job education) seriously to gain the skills that make them marketable to employers. Amen.
Unless he is helping a President he admires by lowering expectations, Reich’s comments are consistent with people I’ve interviewed in accounting, banking, and law. It’s also pretty square with results from our monthly IB100 polling, which has yet to register even 1% on in the “excellent” category to the question: How would you rate the current state of the U.S. economy?
It’s worth noting the differences in various questions between our initial polling in June 2009, which is when the recession officially ended, and our most recent polling. The biggest difference comes in the “fair” and “poor” categories when rating the U.S. economy. In our first IB100 poll, published last July, 57% rated the national economy poor, while only 41% thought that way in March of 2010. Also last July, only 39% rated the national economy fair, whereas a healthier 57% rated it fair in March.
That’s a reflection of two straight quarters of GDP growth, and the solid prospects for a third in the first quarter of 2010.
In Dane County, perceptions actually are worse than they were last summer. Like the national economy, 0% still categorize the local economy as excellent. No surprise there. But the percentage who view the local economy as “good” actually declined from 26% to 20%, and the percentage who see it as poor increased from 3% to 7%. The only category to show improvement was “fair,” which increased from 70% to 73%.
So much for the insular nature of Greater Madison’s economy.
The key forecasting metric — staffing levels — is better but also reflects a holding pattern. Last July, 20% of the IB 100 expected an increase in staffing in the next 90 days, 66% predicted it would remain the same, and 15% foresaw a decrease. In our most recent survey, 25% predicted an increase, 68% expected to stay the same, and 7% forecast a decrease.
Another factor in the local wait-and-see approach on hiring could be worries of a prolonged credit drought. Any hopes of a credit easing were dashed recently with news of troubled commercial real estate loans, many of which reside in community banks that serve small businesses. Expect bank lending requirements to remain more stringent than in the past.
Even with federal legislation designed to promote hiring, only marginal improvements are expected in the unemployment rate — in part because more people will re-enter the job market as jobs are added. Some economists are preparing Americans for what they call a “new normal” of stagnant job growth, and Greater Madison businesses interviewed by IB consider a 10% drop in business over a year ago to be a sign of decent business performance.
We do indeed live in challenging times.
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