Dismal May Unemployment Report Should Be ‘A Wake Up Call’ For Washington, Economist Says

Anemic job growth last month proves Washington is missing the point as it argues about federal deficit control instead of spurring employment, according to one Washington economist.

The Labor Department reported Friday that employers added just 54,000 jobs in May, adding to fears the U.S. economy is dangerously close to stalling out and potentially falling back into recession. The nation’s unemployment rate shot to 9.1 percent.

“Today’s employment report should be a wake-up call to policymakers who continue to say the budget deficit is a more immediate threat to the economy than the jobs deficit,” says Chad Stone, chief economist at the Center for Budget and Policy Priorities, a Washington think tank. “Nearly two years after the economy technically turned the corner from recession to recovery, job growth was disappointing in May and unemployment remained high. At the same time, interest rates are very low, indicating that financial markets are far more concerned in the near term about a sluggish recovery than about deficits, debt, or inflation.”

Republicans and Democrats have spent recent months arguing over levels of federal spending and the size of the federal budget deficit, with congressional conservatives pressing billions of dollars in cuts to a swath of federal programs. Republican lawmakers, particularly, have rejected calls to raise the federal debt limit without huge budget cuts.

“Lawmakers must raise the debt ceiling so that the United States does not default on its obligations arising from tax and spending legislation that was previously enacted,” Stone says. “If implemented now, those budget cuts would drain purchasing power from the economy at a time when the recovery is already losing momentum and forecasters expect another quarter of sluggish growth.

“Adding insult to injury, a number of states have cut or are thinking about cutting the number of weeks of unemployment insurance (UI) they will provide to newly unemployed workers, while congressional Republicans have proposed legislation that would allow states to prematurely end federal benefits for the long-term unemployed,” Stone adds in a statement. “UI is one of the most effective means of boosting demand in a weak economy, and cutting UI benefits will be a drag on an already flagging economic recovery.”

In May, despite 15 months of private-sector job growth, there were still 6.9 million fewer jobs on nonfarm payrolls than when the recession began in December 2007, and 6.7 million fewer jobs on private payrolls, Stone notes.

The number of unemployed rose to 13.9 million.

Long-term unemployment remains a significant concern, Stone adds.

“Over two-fifths (45.1 percent) of the 13.9 million people who are unemployed — 6.2 million people — have been looking for work for 27 weeks or longer. These long-term unemployed represent 4.0 percent of the labor force,” he says. “Prior to this recession, the previous highs for these statistics over the past six decades were 26.0 percent and 2.6 percent, respectively, in June 1983.”

Meanwhile, Labor Secretary Hilda Solis tried to put a brave on the dismal jobs numbers.

“While our rate of job growth slowed last month, we added 83,000 private sector jobs in May, and our economy continues to grow. We’ve now had 15 straight months of private sector job growth and added 2.1 million jobs over this period,” she says in a statement of her own. “We are making progress, but we need to do even more to put Americans back to work. As we debate the nation’s budget and work to address the deficit, we must continue to make smart investments in our infrastructure and in new industries like clean energy and alternative fuels to help to grow our economy and create more jobs for Americans here at home.”

Solis, however, warned against further government layoffs at the state and local levels.

“One impact on the May job numbers was a reduction in the government workforce. We have lost 73,000 government jobs in the last three months. As states and localities make budget decisions, they should cut judiciously because their decisions have an impact on jobs and the direction of our economy,” she says. “Also, policymakers should resolve the debt ceiling issue to reduce market uncertainty and bolster consumer confidence so more businesses will reinvest in our economy and continue to create American jobs.”


Scott Nance is the editor and publisher of the news site The Washington Current. He has covered Congress and the federal government for more than a decade.

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