Earlier this year, New York Times reporter Peter Goodman wrote that the Great Recession has been replaced by the "Great Ambiguity." This obscure, albeit apt, description of the U.S. economy seems still to be accurate today, as reflected by the action taken last week by the National Bureau of Economic Research (NBER). Despite consecutive monthly gains in employment and wages sufficient to declare an official end to the recession, NBER took the conservative posture of concluding that more data is necessary before it can call an official end to the economic downturn. That decision was unexpected although not surprising. Almost every major piece of economic news supporting the notion the economy has rebounded is fraught with qualifiers. Bank profits for the largest firms, for example, are tempered by ongoing distress in the real estate markets and a continuing failure to lend by those institutions. At the same time, bank failures for smaller institutions that were not prioritized in the financial system bailout remain high with 140 failing last year and 48 banks having been taken into receivership as of April 16. That compares to only 25 failures in 2008 and three failures in 2007.
The welcomed increase last month of more than 160,000 non-farm jobs was offset by the reality that as many as 120,000 new jobs are needed each month just to absorb new entrants to the labor market and nearly 50,000 of the jobs created in March were temporary positions related to the 2010 Census. Meanwhile, long-term unemployment is at an historic high with the median length of joblessness exceeding 31 weeks. The economic survival of millions of unemployed workers swings in the balance as Congress wrenchingly extends long-term benefits on a monthly basis, as if the economy any day now will absorb those laid-off workers. Going back to 1982, each recovery has been slower to produce new jobs, reflecting structural shifts within the U.S. economy and international competitive challenges that have been long in the making. The New America Foundation estimates 330,000 new jobs are needed each month for the next five years to close the current jobs gap, yet the economy created only 100,000 per month on average between 2001 and 2007. Many of those jobs were in the bloated financial sector that has now subsided. And, strong business productivity gains over the past year suggest many jobs lost during this recession will not return.
Further, while unemployment is generally considered a lagging indicator of the health of the economy, it is currently the leading cause of foreclosures. Although delinquencies have fallen for the second consecutive month, foreclosures grew by nearly 20 percent between February and March of this year. RealtyTrac estimates foreclosures for 2010 will total nearly 3.5 million. It's difficult to envision a robust and sustainable recovery when the problem that unhinged the credit markets and economy continues to accelerate.
Put America Back to Work
Last year, the President Barack Obama articulated the need to put America back to work through a major infrastructure investment program. We should return to that idea and enact such a program. The nation's infrastructure is aging and in dire need of repair or replacement. Investing in infrastructure could create important efficiencies to the economy, promote green jobs, improve the environment, and provide needed and targeted employment and training opportunities in disadvantaged urban and rural communities, as well as Native American Tribal Lands. More jobs would also reduce foreclosures. Infrastructure spending should not be limited to bridge and highway construction in the suburbs. Rather it should focus on improving or building commuter and high-speed rail lines, upgrading communications systems, renovating or building schools and community colleges, as well as state-of-the art job training facilities, investing in dams, waterways, and water treatment facilities, reclaiming key wetlands, and improving the basic livability of impoverished neighborhoods. Concerns about large deficits are legitimate. The debate, however, is not about whether deficits are good but rather when are they necessary and what spending acts as investments that help reduce them over time. Stimulating jobs while improving the nation's infrastructure would be a more effective response to the current economic and deficit challenges than culling through reams of ambiguous economic data attempting to statistically demonstrate a recovery has ensued.
Roosevelt Institute Braintruster James H. Carr is Chief Operating Officer of the National Community Reinvestment Coalition.