Off the Charts Blog | Center on Budget and Policy Priorities

Today’s jobs report shows that employers continued to add jobs in May, but total employment (private and government combined) remains well below its level at the December 2007 start of the Great Recession. Job losses were far greater than in other recent recessions, and the pace of job recovery has been no faster than it was from the much milder 2001 recession — partly due to federal fiscal actions since 2010.

Below are some charts to show how the new figures look in historical context. Check here for my full statement with further analysis.

I wrote recently for the US News & World Report Economic Intelligence blog about Federal Reserve Chairman Ben Bernanke’s testimony before the Congressional Joint Economic Committee:

Bernanke clearly explained what’s still wrong with the economy, outlined the Fed’s thinking on monetary policy and strongly implied that fiscal policy is still off base. His account and policy recommendations reflect mainstream economic thinking – and, thus, run counter to much of the economic doctrine that’s driving Republican budget policies.

Bernanke argued that the Fed’s extraordinary measures to stimulate the economy are consistent with its dual mandate to pursue maximum employment and price stability.  As the chart below shows, unemployment remains well above the Congressional Budget Office’s estimate of what it would be if the economy were operating at maximum capacity (the “high employment unemployment rate” in the chart) while inflation is well below the Fed’s target.  However, many Republicans, including Rep. Kevin Brady, chairman of the Joint Economic Committee, want to remove the objective of maximum employment from the Fed’s mandate and effectively eliminate its ability to respond to extraordinary events like the Great Recession.

Bernanke testified that fiscal policy (changes to taxes and spending) was quite expansionary at the federal level during the recession and early in the recovery, as spending increases and tax cuts helped to stimulate the economy.  However, spending cuts and tax increases at the state and local level (where balanced budget requirements generally rule) and subsequent tightening at the federal level (spending cuts and tax increases) substantially offset that expansionary effect.

Once again, Bernanke implicitly asked for help from lawmakers to boost employment in the short term without compromising longer-term fiscal stabilization by “replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.”

Republicans argue that the 2009 Recovery Act was ineffective, that a balanced budget amendment to the Constitution is a good idea, and that large, immediate spending cuts won’t harm the economy.  Not surprisingly, as I conclude the US News blog post, “the House Republican budget goes full bore on deficit reduction, starting immediately – jobs be damned.”

That’s not where we need to go.

You can read the entire US News post here.

My latest post for U.S. News & World Report’s Economic Intelligence blog addresses conservative critics’ argument that SNAP (the Supplemental Nutrition Assistance Program, formerly food stamps) is “broken” and must be “reformed.”  In reality, as our recent blog series shows, SNAP expanded as it’s supposed to during the severe recession of 2007-2009 and subsequent slow recovery and will shrink as the economy improves.

But why, as critics note, did SNAP enrollment continue rising after 2009, even as unemployment began to fall?  Because, it’s not unusual for poverty and hardship to continue rising even after unemployment peaks.

Moreover, the last few years have been very different from a typical recession and recovery, as our Legacy of the Great Recession chartbook shows.  The unemployment rate thus has been a relatively poor indicator of the state of the labor market, for two reasons in particular.

First, the unemployment rate doesn’t include the many people who want a job and would likely have one in a stronger labor market but haven’t looked enough to count as officially unemployed.  Nor does it include the many people who would like to work full time but can only find part-time work.

The graph below, which highlights the share of the population with a job (the so-called employment to population ratio), paints a grimmer picture of what’s happened to employment.  Part of the sharp decline reflects higher unemployment, but the rest reflects a decline in labor force participation.

The Labor Department estimates that 22 million Americans who want to work either don’t have a job or are working only part-time when they want to work full-time.

Second, the unemployment rate doesn’t tell us about long-term unemployment — those out of work for at least 27 weeks — which remains historically high (see second graph).  With the deep and prolonged recession and weak recovery, SNAP has become increasingly valuable for the long-term unemployed, since it’s one of the few resources available for people who have exhausted their unemployment benefits.

In short, the number of people qualifying for and receiving SNAP benefits is still high because unusually high unemployment, reduced incomes, and limited job opportunities all persist.  The best way for policymakers to lower SNAP costs would be to aid the economic recovery to create jobs and boost incomes.

The Tax Foundation’s Elizabeth Malm recently expressed concern on an issue about which we have already weighed in — North Carolina’s decision in March to eliminate its Earned Income Tax Credit (EITC), which provides important support for low-wage working families.  Before we get to Malm, here’s what you need to know:

North Carolina ended the credit as of next year, which will mean a tax hike for 900,000 working households, most of them with children to support.  Adding insult to injury, policymakers also cut the credit for this, its last year on the books, from 5 percent of the federal credit to 4.5 percent, shrinking an already modest benefit.

I wrote in February about the harm that this action would cause to North Carolina’s struggling working families — at a time when the state had just slashed its unemployment benefits and while lawmakers were considering eliminating the estate tax that’s levied on just 23 of North Carolina’s wealthiest estates.

At a recent debate, Malm described regressivity as “a very important concern” and cited the EITC as “one way that we can mitigate the regressivity concerns that do come up when we think about reducing the income tax.”  Malm and CBPP Senior Fellow Jared Bernstein agreed that North Carolina should revisit its decision to eliminate the EITC.

Meanwhile, the state will likely eliminate its estate tax, and lawmakers are considering major tax plans that would force low-income families to pay a greater share of their income in taxes while reducing the taxes of the wealthiest North Carolinians.  They should rethink tax cuts for the wealthy, especially when they come at the expense of tax credits like the EITC that help working families support themselves.

“While the high jobless numbers are partly a legacy of the Great Recession, the fact is that our economy has generated too few jobs for most of the last 30 years and is likely to continue to do so,” CBPP Senior Fellow Jared Bernstein writes in a New York Times op-ed on why full employment should be a central goal of domestic policy.

Here’s an excerpt:

What would it take to reverse these trends? For one thing, in the near term, do no harm. Austerity, including sequestration, is the economic version of medieval leeching. The Federal Reserve continues to apply high doses of monetary stimulus, and that’s supporting low interest rates, which in turn are linked to the improving housing market. But it can’t do it alone, and Congress is counteracting such tailwinds with fiscal headwinds.

We also need a significant, permanent program to absorb excess labor (an explicit part of the Humphrey-Hawkins law). We should consider restarting and rescaling a subsidized jobs program from the 2009 Recovery Act that, though relatively small, made jobs possible for hundreds of thousands of workers.

And we have to reassess our manufacturing policy, including reducing the trade deficit. That means both reshaping our dollar policy — going after competitors who suppress their currencies’ value to get an edge on net exports — and public investments in areas where clean energy intersects with production.

Finally, financial deregulation has become the enemy of full employment: it funnels capital to unproductive parts of the economy, and plays a key role in the “shampoo cycle” of bubble, bust, repeat. Less volatile capital markets mean fewer shocks to the job market.

Click here for the full op-ed.