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Originally published Saturday, August 10, 2013 at 8:09 PM

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Too few jobs, and not enough good ones, to help

There’s wide agreement now that the biggest culprit is the huge drop in demand caused by the downturn, which has not yet been fixed.

Special to The Seattle Times

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The past two Sundays, I looked at how housing and consumer spending have performed in this very slow recovery.

Housing is on the rebound, but climbing out of a very deep hole. Consumer spending remains weak, certainly by the standards of other recoveries in the post World War II era.

The latter problem is closely tied to a third important part of a recovering economy: employment.

As of July, about 11.5 million Americans were unemployed. The economy added 162,000 jobs last month, but it takes at least 125,000 just to keep up with the natural increase in the labor force.

Many jobs are part time and many are at low wages. For example, retail and restaurants made up more than half all jobs added in July.

The recession killed jobs at a faster and deeper rate than any downturn since the Great Depression.

At its worst, jobs dropped 6.5 percent relative to the previous employment peak. By comparison, the 1948 recession, the second-worst drop, fell about 5 percent and quickly rebounded.

This time recovery has been very slow.

The situation has been far better in the Seattle area. While the national unemployment rate is 7.4 percent, Seattle’s rate fell to 4.7 percent in May, which would be considered full employment.

But most metro areas lack our combination of a diverse economy, booming technology sector, trade and Boeing, which has begun cutting back or moving some employment. Seattle didn’t overbuild during the housing boom, and construction has rebounded strongly, not just private projects but major infrastructure in the Highway 99 tunnel, 520 bridge and light-rail expansion.

In 2012, while U.S. gross domestic product grew by 2.5 percent adjusted for inflation, it advanced by 3.6 percent in Washington. We enjoyed one of the strongest showing among the states.

Still, June unemployment in Pierce County stood at 8.5 percent. In Grays Harbor County, it was 12.1 percent.

In addition, Washington’s U-6 unemployment rate in the second quarter was 15.7 percent compared with a national rate of 14.3 percent. This counts not only the officially unemployed (6.8 percent in June) but also part-time workers who want full-time jobs and those who have given up actively seeking employment.

People are still hurting, even in a relatively prosperous state.

Economists have debated the reasons behind severe unemployment for years. Jobs are slower to recover from financial busts. Some argued that structural reasons were to blame, such as a mismatch between skills and available jobs, as well as underinvestment in education and effective retraining.

But there’s wide agreement now that the biggest culprit is the huge drop in demand caused by the downturn, which has not yet been fixed.

Other factors include companies learning to do more with fewer workers — corporate profits have hit record levels — plus a new generation of automation, continued job losses to globalization and government austerity.

There is also a lively debate as to how much full-time hiring is being held back by the health-insurance mandate of Obamacare.

Nationally, making up the lost jobs has proved very difficult. For example, more than 121 million were employed full time in 2007. This July, it was 116 million. Meanwhile, the working-age population has grown by almost 11.4 million.

Put another way, the percentage of working-age adults with jobs has barely improved from the depths of 2010.

Unemployment is especially high among minorities, young people and older workers who have lost their job. The summer job market for teens remains gloomy.

Dig deeper and the data are more troubling.

Earlier this month, the government released its Job Openings and Labor Turnover Survey for June. The so-called JOLTS shows how much new hires are contributing to total employment and is an important measure of the labor market’s strength. It has shown no sustained improvement for two years.

Not only that, but there’s much less ”churn” than normal, people leaving old jobs and taking new ones.

According to economist Heidi Shierholz of the Economic Policy Institute: “The reason there is less churn today is that job opportunities are so scarce that employed workers are much less likely to quit the job they have.”

The traditional policy responses to high unemployment have included government stimulus such as infrastructure investment and hiring. For example, Ronald Reagan increased civilian federal employment to help combat the severe 1981-82 recession.

The Obama stimulus was too small for the recession it was trying to combat. Now, paralysis and division in Washington, D.C., make another stimulus impossible. Indeed, the cutbacks because of the sequester are hurting the labor market.

The Federal Reserve can address unemployment only indirectly. Its aggressive response to the downturn prevented devastating deflation, saved the big banks and let loose a bull market on Wall Street. But unemployment remains at a rate that in previous decades would have been considered a crisis. The elites are treating it as a new normal.

So we will muddle along. Barring another recession, job creation will continue and eventually make up the deficit. Whether they will be good jobs is another question, and the evidence is not promising.

Count your blessings, Seattle.

You may reach Jon Talton at jtalton@seattletimes.com

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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest
jtalton@seattletimes.com

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