An Anemic Recovery: January Federal Jobs Report

By Sid Hollander

The anemic recovery of the labor market proceeded apace in January, with unemployment ticking down by only a tenth of a point, from 6.7 to 6.6 percent (10.2 million people.)  Job creation sputtered along at little more than half the rate that prevailed in the autumn, with only 113,000 jobs added.  That is only just enough to keep up with population-driven growth in the labor force.

Taken together with the even weaker job-creation performance in December (a mere 75,000 jobs added) it once again raises doubts about the depth and durability of the recovery that started in June 2009.  It is no small irony that the January report, which documents the persistence of historically high (35.8 percent) levels of unemployment lasting over half a year, was released only a day after a Senate filibuster had blocked the approval of extended unemployment insurance payments to the long term unemployed.

It is well known that that the standard unemployment rate tells only about half the story of the shortage of jobs.  Ignored by the official statistics are those who have had to settle for only part-time work, and those whose efforts to find work over the previous 12 months have not included explicitly “looking” for work in the past week.  Counting these officially uncounted job seekers would give us an overall unemployment rate of 12.7 percent (20 million people.) 

That 12.7 percent can be compared with an overall unemployment rate of 7.9 percent that existed at the end of 2006, following a period of only fairly weak employment growth and shortly before the onset of the Great Recession.  If 7.9 percent were our overall unemployment rate today, instead of 20 million people we would be talking about only 12.5 million unemployed.  An additional 7.5 million people would be employed in full time jobs!

The “jobs-lite” recovery is now about four and a half years old and shows no signs of establishing the sustained job growth of at least 250,000 per month that would bring unemployment down to its pre-recession levels in the next four and a half years. 

The problem of weak job creation, however, dates from well before the onset of the recession.  Job creation has been trending down for many years.  As recently as the year 2000, 64.6 percent of the adult population (including teenagers) was working.  Now only 58.8 percent is working.  That amounts to approximately 15 million fewer jobs. 

Part of the reason for the jobs deficit can be traced to the growing inequality in the distribution of income in the United States.  As income flows increasingly to the top of the income distribution overall expenditures fall, because the rich spend a much smaller fraction of their income than do those whose small incomes are completely used up buying the necessities of daily life.  With aggregate demand for goods and services thus limited, businesses hesitate to expand for fear that they would not be able to sell their additional production.  That hesitation translates immediately into reduced economic growth and job creation, all because of the extreme inequality in the distribution of income.  One commentator, Joseph Stiglitz, estimates that extreme inequality may keep the official unemployment rate as much as two to five percentage points higher than it might be otherwise.

The pathologies of the private sector have their counterparts in the public sector.  The January jobs data tell us that government employment dropped by 29,000.  With the effects of the federal government’s timid stimulus now long past, many state and local governments continue to struggle to maintain already-reduced services, with federal employment also down.  What stands out is the federal government’s failure to mount a public jobs program that is even remotely commensurate with the scope of the Great Recession.  Perhaps worse is the failure to address the longer-term failure of job creation throughout the economy. 

The Chicago Political Economy Group (CPEG) has proposed a large federal government jobs program that would be financed by a small tax on financial transactions (“A Permanent Jobs Program for the U.S.” available at Addressing both the long- and short-term failures of job creation, it would create jobs directly.  It would also alleviate income inequality and thereby promote further job creation.  At the low end of the income scale, the jobs would go first to those who have been forced to the margins or entirely out of the labor market.  At the high end of the scale, the financial transactions tax would eat into some of the uberprofits in the financial sector, profits that have contributed to the recent acceleration of inequality.  Bills embodying elements of the CPEG program are pending before the congress.  Congressman John Conyers has introduced “The 21st Century Humphrey-Hawkins Full Employment Act” (HR 1000) and Congressman Keith Ellison has introduced “The Inclusive Prosperity Act” (HR 1579).

Both the Conyers and the Ellison bills deserve our strong support, and it can come none too soon.  Time is not on our side.  The power of the rich to make themselves richer will only compound itself as their open-ended political spending grows under the shelter of Citizens United.  In the race between the power of money and the power of numbers of people, the power of money is rapidly pulling away, and the power of popular politics to reverse the growth of inequality is dwindling.




Sid Hollander is a founding member of the Chicago Political Economy Group.




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