March 29, 2024

Employment in U.S. Lags Where It Was in 2007

Indeed, contrary to the widespread view that the United States is an island of relative prosperity in a global sea of economic torpor, employment in several other nations has bounced back more quickly, according to a new analysis by the Bureau of Labor Statistics.

The government reported Friday that the nation added 175,000 jobs in May, continuing a 32-month run of job gains. The unemployment rate moved up slightly to 7.6 percent, from 7.5 percent in April.

But overall employment in the United States remained 2.1 percent below where it was at the end of 2007, according to the statistics bureau. By comparison, over the same period, between December 2007 and March 2013, the number of jobs was up 8.1 percent in Australia; Germany, the biggest economy in the troubled euro zone, has managed a 5.8 percent gain in employment.

“The United States is way below where it should be,” said Lawrence F. Katz, a professor of economics at Harvard. “We had a massive downturn and a tepid recovery.”

Still, Friday’s jobs report appeared to be just what Wall Street was hoping for. Major stock market indexes jumped by 1.3 percent as traders bet that the modest employment gains and the uptick in joblessness meant that the Federal Reserve would be forced to keep pumping money into the economy in a bid to stimulate greater growth.

The Fed’s push to keep short-term interest rates near zero and flood the economy with trillions of dollars since the onset of the recession has been credited with staving off a far deeper downturn. It also has helped stabilize the housing market and given Wall Street a major lift since the dark days of early 2009, when the Dow Jones industrial average was below 7,000. On Friday, the Dow closed at 15,248.12, more than double the recession low.

The United States economy is performing relatively well by some yardsticks — a steady increase in economic output, a surge in corporate profits and new stock market highs — but the robust job market that is a key focus now of Ben S. Bernanke, the chairman of the Federal Reserve, and other Fed policy makers remains out of reach.

While several European countries have fared worse, Canada, Sweden and even Britain, which is trapped in yet another recession, have enjoyed healthier job gains than the United States. In fact, of the nine countries surveyed by the Bureau of Labor Statistics, only perennially-troubled Italy and Japan performed worse.

A big part of the problem, economists say, is just how big a hole the American economy fell into in the first place. Not only did the global economic downturn begin here, it also enveloped the housing market and the banking system, sectors that were largely spared in many other countries.

“Canada didn’t really have much of a housing bust,” Mr. Katz said.

A new paper by two economists from the University of British Columbia, Florian Hoffmann and Thomas Lemieux, concludes that over half of the recent variation in employment trends between the United States on the one hand, and Canada and Germany on the other, can be attributed to the construction sector.

Although the construction field gained 69,000 jobs in the first five months of 2013, with 5.8 million jobs in May, that was still nearly two million fewer jobs than in 2007, according to the Labor Department.

Other countries have generated jobs on the basis of strong exports. Germany’s economy, for example, was powered until recently by shipments of machinery, cars and other products of its high-end manufacturing industries. Australia emerged largely unscathed from the downturn, thanks to booming Chinese demand for raw materials.

The German government also went to great lengths to discourage outright layoffs, instead encouraging employers to keep workers in a part-time capacity. At the same time, letting workers go in Europe is a much more costly proposition for big employers than it is in the United States.

Another challenge in the United States, Mr. Katz said, is the fiscal squeeze in the public sector, as the government continues to shed jobs at a rapid rate.

Reporting was contributed by Catherine Rampell, Annie Lowrey and Binyamin Appelbaum.

Article source: http://www.nytimes.com/2013/06/08/business/employment-in-us-lags-where-it-was-in-2007.html?partner=rss&emc=rss

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