Economist: Job Market ‘Remains Mired in Deep Slump’ As Congress Proves Ineffectual

The federal government’s June unemployment data portrays a labor market that continues to struggle, according to a Washington economist. Moreover, the inability of Congress to improve the situation not only will cause pain for individual Americans, but imperils whatever economic recovery is taking hold, he adds.

The Labor Department Friday reported that although the U.S. economy gained a meager 83,000 jobs in the private sector, overall employment declined by 125,000 jobs. The job losses are largely a result of 225,000 temporary Census workers ending their service, the government says.

The job market remains “mired in a deep slump with weak underlying job growth,” and many more people are looking for work than there are new jobs being created, says Chad Stone, chief economist at the Center for Budget and Policy Priorities, a Washington think-tank that focuses on the needs of low- and moderate-income Americans.

Stone calls the nation’s 9.5-percent unemployment rate “disturbingly high.”

Private sector job creation must be much stronger going forward— at least 200,000 to 300,000 new jobs per month — to bring people back into the labor force and lower the unemployment rate at the same time, he says.

“Unfortunately, hopes that Congress will enact effective jobs measures are fading fast as too many lawmakers seem to think that their immediate priority should be the budget deficit rather than the jobs deficit,” he adds.

Lawmakers have been working on legislation called the American Jobs and Closing Tax Loopholes Act. That bill would close tax loopholes that reward corporations for sending American jobs overseas. It contains a number of other provisions designed to incentivize job creation, as well. In addition, the bill would extend unemployment benefits for out-of-work Americans for whom such benefits have begun to expire.

The Senate bill also would extend financial aid to states which face another round of painful budget cuts and layoffs because the poor economy has so shrunk tax revenues.

The House approved a version of the legislation in May. But Senate Republicans have, for weeks, blocked a vote on the Senate version. Senators left town this week for their annual July 4 recess, and won’t try again to pass jobs legislation until at least July 12.

“Efforts to pass an adequate jobs bill unraveled in recent weeks, and Congress did not pass even minimal measures before leaving for its July 4th recess to help unemployed workers who are exhausting their benefits and states struggling to close their gaping budget shortfalls. That not only means more hardship for many individuals, but also additional obstacles for an economic recovery that is struggling to gather steam,” Stone says.

The results of congressional inaction means unemployed workers won’t have as much money to spend and will cut back their purchases. States will have to raise taxes, lay off workers, cancel contracts and scale back programs even more than they otherwise would, Stone says.

“Reduced spending by unemployed workers, newly laid-off state employees, and state contractors who lose business will be a significant drag on the recovery and will impede job growth,” he says. “Temporary unemployment insurance benefits and state fiscal relief are two of the most effective measures to stimulate economic growth and job creation.”

Even the reason for the slight decline in the national unemployment rate is bad news, Stone says. Although the number of unemployed fell slightly to 14.6 million, that decline is due to jobless Americans leaving the labor force rather than an increase in the number of people with jobs, he says.

‘Misguided’ Objections

Stone calls GOP objections to jobs legislation as too expensive and deficit-bulging “misguided.”

“Not only is the impact of these temporary measures on the long-term budget deficit minimal, but requiring contemporaneous deficit offsets would reduce or undo the job-creating effects of the measures they are paying for,” he says. “Congress needs to act quickly when lawmakers return from recess to renew unemployment insurance benefits and extend state fiscal assistance and TANF emergency funds. Today’s jobs report shows that the economy can use all the help it can get to stimulate a faster pace of job creation.”

TANF refers to the federal Temporary Assistance for Needy Families emergency fund, which Stone calls “one of the most cost-effective job-creating programs we have.”

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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