Is current jobless state the nation's new reality? - East Valley Tribune: Nation / World

Is current jobless state the nation's new reality?

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Posted: Thursday, September 8, 2011 2:15 am

WASHINGTON - The United States' jobs crisis is sending officials into a frenzy seeking answers and leading others to conclude that the present employment picture is actually the nation's new reality.

As Bruce Springsteen sings in "My Hometown," "Those jobs are gone, boys, and they ain't coming back."

Jobs, and the dismal unemployment rate of 9.1 percent, will be the focus of a major address President Barack Obama is scheduled to give Thursday.

Obama is expected to call for renewing the payroll tax holiday, establishing some type of infrastructure program, offering a tax credit for employers who expand their payrolls and supporting job training for the long-term unemployed.

Officials on both sides of the political aisle are formulating plans to boost job creation and offset a recent wave of gloomy news.

Last Friday, the Department of Labor reported that no new jobs were created in August. The previous week, the Congressional Budget Office forecast that the unemployment rate wouldn't fall to 8 percent until 2014. And the midyear budget review by the White House Office of Management and Budget showed the unemployment rate was expected to average 9 percent through 2012.

The U.S. has lost 7 million jobs since 2007, the McKinsey Global Institute -- the management consulting firm's research arm -- noted in a report this summer, and must create 21 million new ones by 2020 to regain "full employment," defined as a 5 percent unemployment rate.

Some economists speculate that America faces a new, higher rate of natural unemployment.

Two officials with the Federal Reserve Bank of San Francisco, Justin Weidner and John C. Williams, have found mounting evidence that structural factors may have increased the "normal" unemployment rate to about 6.7 percent, a shift that could last for several years.

Their research indicates:

- Extended unemployment benefits, while helping keep families afloat during economic downturns, may reduce incentive for the unemployed to seek and accept less desirable jobs.

- An increasing mismatch between job seekers and potential employers. The construction, finance and real estate sectors shrunk after the housing bubble burst in 2008. The skills of workers who used to be employed in those sectors may not easily transfer to growing sectors like education and health care.

The McKinsey report also predicts shortages of nutritionists, welders, nurse's aides, computer specialists and engineers. It anticipates that nearly 6 million Americans without a high school diploma are likely to be without a job.

In 2009, the president called for a $787 billion stimulus package intended to get more money into circulation and create more jobs. Senate Republican Leader Mitch McConnell of Kentucky criticized the effort as a failure that helped drive up the national debt to $14.3 trillion.

But the Congressional Budget Office reported in late August that the stimulus -- formally known as the American Recovery and Reinvestment Act -- accounted for 1 million to 2.9 million jobs in April, May and June of this year, and lowered the unemployment rate by 0.5 percent to 1.6 percent during the same period.

Yet it's unlikely the president will seek another stimulus in face of robust GOP opposition.

Republicans are pushing their own plan to cut taxes, enhance foreign trade, slash federal spending and eliminate regulations that they claim serve as a disincentive to hiring.

Tom Donohue, president of the U.S. Chamber of Commerce, agrees the federal government needs to address the nation's deteriorating infrastructure.

But he maintains that, to generate growth, the nation must "clear away the impediments (that) government has imposed" and that discourage business expansion. It needs to expand trade, promote tourism and make it easier for foreign travelers to visit, increase domestic energy production and eliminate a slew of regulations.

"The combined weight of all this new regulatory activity," he said, "... is killing American jobs."

Rich Trumka, president of the AFL-CIO, the nation's largest labor organization, has rolled out his own jobs plan to revive the nation's manufacturing base and "stop exporting good jobs overseas." Like Obama, he wants an infrastructure work program. And he wants federal aid so states and municipalities can extend unemployment benefits and avoid more public-sector layoffs.

"Some will say America can't afford to invest big to create jobs," Trumka said. "... I say anyone who believes that either lacks imagination and a knowledge of history or is just plain afraid of hard work."

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