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EPI Study: Economy needs 8 million jobs to recover

Wed, Jan 29, 2014

Six years after the onset of the Great Recession, the U.S. economy needs nearly 8 million jobs to return to pre-recession health, according to a new report by the Economic Policy Institute, an independent, nonprofit think tank. In Six Years From its Beginning, the Great Recession’s Shadow Looms over the Labor Market, EPI economist Heidi Shierholz writes that while some economic indicators—such as the stock market and corporate profits—have improved substantially since the Great Recession, the labor market remains extraordinarily weak. This demonstrates the importance of expansionary fiscal policy, including large-scale ongoing public investments, restoration of public services and public-sector employment that was cut in the recession and its aftermath — and the renewal of federal unemployment insurance benefits.

The economy still needs 7.9 million jobs to return to pre-recession health; at the current pace of job growth, it would take roughly five more years to get there.
Lack of available jobs also shifts bargaining power away from workers and means employers can avoid substantial wage increases to get and keep the workers they need.

Increased employment has not driven most improvement in the unemployment rate since its peak of 10 percent in the fall of 2009. Rather, potential workers have dropped out, or never entered, the labor force because job opportunities are so weak.

“Today’s labor market weakness is not due to workers lacking skills for available jobs, but because there are not enough jobs—there are nearly 3 job seekers for every 1 open position,” Shierholz said.

Other key findings include:

It is likely that 12.7 percent of all workers experienced unemployment at some point in 2013. The estimate is significantly higher for racial and ethnic minorities: 15.5 percent of Hispanic workers and 19.7 percent of black workers.

Austerity in the public sector is a key driver of the economy’s weakness. Since the beginning of the recovery in June 2009, the public sector has lost 728,000 jobs. Just to keep up with population growth over this period, public-sector employment should have increased by around 750,000. That means the total gap in public-sector employment today is around 1.5 million jobs. Nearly 30 percent of that gap has occurred among K-12 teachers in public schools.

Suzanne Hanney
From Prepared Materials

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