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Drivers of Job Creation

Drivers of Job Creation

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Jennifer Erickson, Director of Competitiveness and Economic Growth at the Center for American Progress, testifies before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Economic Policy.
Jennifer Erickson, Director of Competitiveness and Economic Growth at the Center for American Progress, testifies before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Economic Policy.

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Published by: Center for American Progress on Jun 19, 2014
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1 Center for American Progress | Drivers of Job Creation
Drivers of Job Creation
 Testimony Before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Economic Policy
Jennifer EricksonDirector of Competitiveness and Economic GrowthCenter for American ProgressMay 7, 2014
Tank you Chairman Merkley and Ranking Member Heller or inviing me here o esiy. My name is Jennier Erickson, and I am he Direcor o Compeiiveness and Economic Growh a he Cener or American Progress.I is difficul o imagine a more imporan issue or he securiy o boh American amilies and he American economy han creaing and mainaining good, middle-class  jobs. Wih ha in mind, my esimony oday will ocus on hree hings: an overview o he curren jobs picure in he Unied Saes, policies ha can promoe job creaion in he shor o medium erm, and also wha we need o do o ensure a vibran economic ecosysem in he uure.Cenral o all o his analysis is he undersanding ha i we are going o have a srong and growing economy, we need a srong and growing middle class. Presiden Barack Obama righly idenified reigniing he engine o growh o he middle class as he defin-ing issue o our ime.
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Ta is because we know ha wih a srong and growing middle class, we have a more sable source o demand, a bigger pipeline o boh enrepreneurs and skilled workers, and he criical suppor needed or public insiuions ha a vibran middle class provides.
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Overview of the current jobs picture
Beween lae 2007 and June 2009, he Unied Saes underwen is longes and mos severe economic conracion since he Grea Depression, he resul o a real esae bub- ble and he ensuing crash ha had is roos in lax regulaions, opaque financial producs, and unsusainable household deb.
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2 Center for American Progress | Drivers of Job Creation
Te economy saw a rapid increase in unemploymen, rom 5 percen in December 2007 o a peak o 10 percen as o Ocober 2009.
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 Tis decline in employmen exceeded ha o any recession over he pas ew decades
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 and was he firs on record o wipe away all o he previous job gains o he mos recen economic expansion.
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 I has been nearly five years since he official end o he recession,
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 and he economy coninues o recover. 2013 was he hird sraigh year in which privae-secor employ-men rose by more han 2 million jobs.
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 And as o las week’s jobs numbers, he U.S. economy has seen 50 sraigh monhs o privae-secor job growh, adding a oal o 9.2 million privae-secor jobs.
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 While he signs o improvemen are encouraging, here is no doub ha he pace o he recovery in erms o growh and jobs has been modes and underwhelming when  we consider he poenial labor-orce growh during his ime. Subbornly high unem-ploymen and low labor-orce paricipaion coninue o define oday’s workorce. As o  April 2014, he Unied Saes had an unemploymen rae o 6.3 percen, down nearly 4 percenage poins rom he labor marke’s recession peak.
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 While here has been seady privae-secor job growh over he pas 50 monhs, he pace has been oo slow o resore us o ull employmen.
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 Te curren share o workers eiher working or looking or  work alls below he rae a he beginning o he recession󲀔66 percen󲀔and is equal o he lowes paricipaion rae since around 1978.
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 Te long-erm unemployed have suffered remendously as we coninue o see an abnormally high number o Americans who wan o work bu are unable o find employmen. As o April 2014, here were 3.5 million Americans who have been acively searching or a job or 27 weeks or more.
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 A 35.3 percen, he curren rae o long-erm unemploymen as a share o he unemployed alls below he peak during he recession bu is ar and away he highes level on record.
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 Among hose ages 20 o 24, here is an unemploymen rae o 10.6 percen, more han 4 percenage poins higher han he naional average.
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  According o Adam Hersh o he Cener or American Progress, he economy is cur-renly growing a around 60 percen o he pace se by he prior hree U.S. expansions rom as ar back as 1982.
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 Since he June 2009 rough, “he economy has grown jus 11 percen overall.”
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 O he las six recoveries, he mos recen recovery ranks behind all  bu December 2001, wih he smalles share o monhs wih job growh above 200,000, or 33 percen.
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 Moreover, a he curren average rae o job growh, analysis done by CAP’s Michael Madowiz using Te Hamilon Projec’s esimaes demonsraes ha he U.S. economy will no reach is ormer level o employmen unil 2019.
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3 Center for American Progress | Drivers of Job Creation
Much o he problem has o do wih he ac ha our economy is suffering rom a large oupu gap. Trough he firs quarer o 2014, demand or goods and services has been more han 4 percen less han wha he economy can supply.
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 Tis resrained growh can be largely atribued o boh fiscal auseriy and sagnan incomes or amilies across he Unied Saes.
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 While businesses coninue o see srong earnings and capure a major share o he income gains hroughou he recovery, his has no ranslaed ino more jobs.
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 Tis is largely because businesses have less o an incenive o inves when consumer demand is weak.
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 Tis need o improve our economic prospecs has no been helped by sequesraion, deb ceiling debaes, and spending cus on boh he ederal and sae levels. In par-icular, according o he Council o Economic Advisers, he mos recen governmen shudown and deb limi brinkmanship had a “subsanial negaive impac” on he economy, resuling in a “0.25 percenage poin reducion in he GDP growh rae in he ourh quarer and a reducion o abou 120,000 privae-secor jobs in he firs wo  weeks o Ocober.
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 Addiionally, no only have hese auseriy policies resuled in cus o invesmens and services criical o economic growh, bu hey have also led o cuting jobs󲀔including he loss o hundreds o housands o public-secor jobs since he end o he recession.
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 In shor, while we are slowly recovering rom he wors economic crisis since he Grea Depression, in February 2014, he Congressional Budge Office esimaed ha eco-nomic growh rom he end o 2017 onward will be “well below he average seen over he pas several decades” and ha he unemploymen rae will remain above 6 percen unil he end o 2016.
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 Nearly hal a decade ollowing he recession, wih 10 million  workers unemployed and 3.5 million who have been looking or work or six monhs or more,
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 he message could no be clearer. We need o ake seps o accelerae job cre-aion, and we also need o ake care ha we are creaing an economic environmen ha is producing good, middle-class jobs.
Policies that can promote job creation in the short to medium term
In 2013, he Cener or American Progress published an economic growh sraegy, “300 Million Engines o Growh,” ha was cenered on he premise ha our economy  will do beter when all Americans are able o paricipae in i a he op o heir alens. In “300 Million Engines o Growh,”
 
 we acknowledge he realiy ha i we are going o grow he larges, mos dynamic, complex economy he world has ever seen, we have o do a lo o hings righ󲀔wih he governmen boh invesing in human capial and seting a compeiive environmen in which our workers and businesses can compee a home and abroad.

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