By Dr. Danny Boston (Gazelle Index, Euquant)
President Obama is correct to refocus attention on the economy. We must create and sustain an innovative and dynamic small business sector and at the same time establish the infrastructure and educational endowment required of a highly competitive economy. Sequestering programs such as Head Start and other educational initiatives designed to jump start a high-quality workforce is not the way out of the mess in which we currently find ourselves.
According to the latest Monthly Jobs Report, the economy continued to make progress in July. However, the pace of job creation is about two-thirds what is required to restore the quality of life most Americans have become accustomed to over the last quarter-century. During July, overall unemployment declined to 7.4%; unemployment among blacks recorded the steepest decline, from 13.7% to 12.6%. White unemployment remained constant at about 6.6% and Latino unemployment barely changed at 9.4%.
The 7.4% unemployment rate would have been encouraging news two years ago. However, the recession officially ended June 2009 and unemployment has yet to reach the 6% range. Given the rate at which jobs are being added, in the neighborhood of about 150,000 per month, it is questionable whether unemployment will reach 6% before the next recession starts.
Typically, we have experienced a recession about every five years since World War II. The current number of jobs being created each month is barely sufficient to absorb new entrants into the labor market. This means those returning from long-term unemployment will find it even harder to become employed. We need approximately 250,000 brand new jobs each month to cover entrance into the labor market and those returning from the ranks of unemployed.
With the GDP growing at only 1.7%, this is not happening.
Worse still, the unemployment picture remains very troubling for some sectors of the labor market. Official unemployment among black youths is 41.6%, while among white youths, it is 20.3%. The high rate of teenage unemployment means future generations of workers are being poorly prepared with the skills, and experience needed to maintain a competitive edge in the new global economy.
The President’s renewed economic focus is on target. It is important because of the persistent shortage of jobs and the lack of quality jobs. Furthermore, workers who are fortunate enough to become employed will have a much lower probability of landing positions that provide traditional benefits such as health and retirement.
The dreadful labor market is an outcome of the way in which corporations have responded to global competitive pressure. They displaced high paid with low-paid workers, filled a greater percentage of their workforce with permanent part-time employees (to whom they have no benefit obligation whatsoever) and are overworking current employees by forcing them to perform tasks once done by many workers.
The future competitiveness of the US economy is heavily dependent upon the extent to which we can foster a dynamically growing and innovative small business sector. High growth, small companies continue to create the lion’s share of new jobs. More importantly, they add higher-quality jobs – the kind that are more secure and provide greater worker satisfaction.