Payroll gains show strength, but joblessness deep-rooted

Posted May 06, 2011, at 9:42 p.m.

WASHINGTON — Despite sharply weaker economic growth in the first quarter, the nation created almost a quarter-million new jobs in April, notched its third straight month of solid payroll gains and eased fears that higher oil prices might undercut the fragile recovery.

But an unexpected uptick in the unemployment rate — to 9 percent last month from 8.8 percent in March — offered a harsh reminder of how deep the roots of America’s jobs problem go and how great the challenges remain.

The U.S. gained 244,000 net jobs last month, but still needs about 7 million additional jobs just to return to pre-recession levels.

And a significant part of the stubbornly high unemployment may be structural: Millions of potential workers may have only the dimmest prospects for finding work even if the recovery continues —owing largely to their levels of skill and education.

The record growth of the long-term unemployed in the last few years represents a major, though seldom discussed challenge to reining in the federal deficit and bringing government spending under control.

Friday’s report by the Labor Department showed 13.8 million workers as jobless in April, of whom about 43 percent, or nearly 6 million, have been unemployed for more than six months.

“They’re willing workers, but they’re not in the right locale or have the right education or career training that qualifies them for the jobs opening up,” said Patrick O’Keefe, economic research director at the financial advisory firm J.H. Cohn.

Back in the early 1980s when O’Keefe was a Labor Department official, the nation also experienced double-digit unemployment, but the share of long-term unemployed never went above 26 percent.

One key difference this time, O’Keefe said, is the much larger number of layoffs of prime-aged workers in jobs that aren’t likely to come back any time soon, such as construction and housing-related industries.

“There is this new challenge particularly of middle-aged male workers who presumed they were qualified for the jobs that existed,” O’Keefe said. “And in today’s knowledge-based economy, that’s not the case.”

Even before the latest recession, the U.S. had a smaller share of its working-age male population employed or looking for work than many of its competitors in the developed world.

The recession has made the problem worse. Today just 67 percent of men 20 years and older in the U.S. are employed, compared with 73 percent in 2007, before the downturn, and 85 percent in the 1950s.

The consequences of this shift are significant for many families and for the nation as a whole. The long-term unemployed contribute little to government tax revenues, even as they consume more publicly financed services such as unemployment and disability insurance and subsidized health care.

The number of unemployed, including the long-term jobless, has dropped in the last year as the economy has begun to create jobs again. Since February of last year, employers in the U.S. have added 1.8 million to their payrolls, including an average monthly gain of 233,000 in the last three months.

The Labor Department’s report Friday suggested that more workers re-entered the job market in April, which helped push up the unemployment figure because people are counted as jobless only if they are actively looking for work.

What’s unclear is whether the recent momentum in hiring can be sustained. And if so, can the U.S. ever again have an unemployment rate around 5 percent, as it did before the recession?

“We don’t believe the potential of the American economy has been permanently damaged because of this recession,” said Austan Goolsbee, chairman of the Council of Economic Advisers at the White House.

Goolsbee sees the jobless rate returning to 5.3 percent, albeit gradually, at a pace of 1 percentage point a year.

In an interview Friday, Goolsbee noted that the April employment gains marked the biggest private-sector job growth in five years. “That’s not a one-time shot, it’s a continuation of a trend,” he said.

Retail employment led the way in April, adding 57,100 jobs. Health care and leisure businesses also beefed up payrolls.

Still, many economists remained cautious about the outlook, citing a recent surge in unemployment claims and continuing government budget woes. State and local governments shed 22,000 jobs last month.

“At this point … we should be getting unambiguously huge growth of 300,000 to 400,000 (new jobs) a month,” said Heidi Shierholz, a labor economist at the Economic Policy Institute. “It’s just nowhere near that.”

Beyond the short-term pain, there are increasing signs that structural labor problems in America may present the more serious challenge. Job vacancy rates recently have drifted up, and there are more anecdotal reports of manufacturers and other companies that are having trouble filling jobs.

Harry Holzer, an Urban Institute and Georgetown University economist, believes that most of the high unemployment today is cyclical; that is, related to business and economic conditions, not inherent shortcomings in the structure of the labor economy.

At the same time, he said, many young, poorly educated men never really got into the labor force, and many older workers with experience but few skills were pushed aside by the downturn in the housing market and the broader economy.

Holzer thinks some in the latter group will retire and others will take lower-paying jobs at retail stores and other service businesses. The best hope for many others, he said, may be to return to school or retool in some way for a shot at a decent-paying job in another field.

 

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