Recovery is Falling Short for Unemployed

Feb 9, 2012

Last week, the head of the bond investment firm Pimco, Mohamed El-Erian, took to the pages of the Washington Post because of his concern with the make up of the unemployed:

With 43.9 percent of the unemployed (5.5 million people) out of work for 27 weeks or more, today’s America faces the unusual challenge of “long-term unemployment”: The longer people are unemployed, the harder it is for them to return to the labor force at the same level of productivity and earnings, and the poorer the prospects for national competitiveness and prosperity.

The numbers for youth unemployment are even more disturbing. A staggering 23.2 percent of 16- to 19-year-olds in the labor force do not have jobs. A prolonged period of inactivity at that stage of life risks turning these younger adults from unemployed to unemployable.

Economist John Taylor dishes out a few charts on the current anemic economic recovery. His first chart shows that the economy is not performing at its potential. This reinforces what Chamber Chief Economist Marty Regalia said last week at his quarterly economic briefing. Another chart shows that the economy more quickly returned to its long-term potential following the 1982 recession. Taylor's final chart compares the labor participation rates during the early 1980’s recovery with the current one. The current rate is flat because this economy isn't growing fast enough to pull people back into the workforce.
 
The path to lower unemployment and a faster, more robust recovery is implementing pro-growth policies: building infrastructure; boosting domestic energy production; reducing costly regulations; and passing comprehensive tax reform.

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