Looking at payroll employment data provides more evidence of the overall weakness of the job market. Since reaching a trough in February 2010, the nation’s payrolls have added about 5.2 million jobs, or about 152,000 per month. This number appears impressive; in fact, the Obama campaign used a version of it on the campaign trail.
However, it is misleading. On average, the economy needs to add about 119,000 jobs per month to keep pace with population growth. Thus, in the 34 months between February 2010 and December 2012, the economy would have needed to add about 4 million jobs just to absorb the natural increase in the population. It actually added fewer than 5.2 million jobs, or a little less than 1.2 million jobs above population growth. To put it another way, after accounting for population growth, there are 7.6 million fewer jobs today than there were before the recession. At the current pace of job creation, it will take 21 more years to close this “jobs gap.”
Typically, the first years of a recovery are the most robust. But the jobs the economy should have created during the first years of the current recovery have been sacrificed to the administration’s tax, spending and regulatory agendas. Of course, recoveries don’t last forever; the next recession will begin with real unemployment at or only slightly below its level at the peak of the last recession.
The punch-line of this analysis is that the recovery has been basically illusory. As the payroll survey shows, employment growth is barely north of population growth. Instead, the vast majority of the decline in the unemployment rate is due to the decline in the labor force participation rate. The actual jobs which have been created are nowhere near enough to compensate for those which were lost during the recession and the population growth which has occurred in the meantime.
Recent events suggest that an actual labor market recovery is not in the cards. Even though the unemployment rate is effectively 9.8% — barely below its recession peak — and the economy is 7.6 million jobs in the hole, the president fought for, and got, a fiscal-cliff bill that increases the tax rate on the country’s most successful small businesses — this on top of Obamacare taxes and penalties, on top of further tax increases which the administration says it wants and on top of a whole slew of new regulations resulting from Obamacare, Dodd-Frank and the administration’s environmental agenda. And by increasing Social Security payroll taxes by 2% on the first $113,000 of income, the fiscal-cliff bill has increased taxes on 90% of taxpaying consumers. These would be questionable policies even with a low unemployment rate and job growth well above population growth. They are indefensible when the country faces an ailing labor market and a jobs gap of 7.6 million jobs.
Andrew Puzder is CEO of CKE Restaurants, Inc., which employs about 21,000 people at Carl’s Jr. and Hardee’s restaurants. He is co-author of “Job Creation: How it Really Works and Why the Government doesn’t Understand it.” Michael Talent is a recent economics graduate from the University of Chicago and was an economic policy analyst for the Mitt Romney campaign.