The Great Recession hit employment much harder than overall output.
CARSON CITY, Nev. — I took blue highways to reach this small capital city of the state with the worst unemployment in the nation.
In Pendleton, Ore., I complimented my server, Theresa, at Stetson’s Steakhouse on a charming downtown with real businesses, the assets so many American places have lost.
“A lot of them are struggling,” she said. “But this is our time of the year to really sparkle.” September marks the 100th anniversary of the Pendleton Roundup and many businesses are counting on the rodeo to bring in tourists.
Oregon’s unemployment rate: A stubborn 10.6 percent.
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In Alturas, Calif., the owner of Hottie’s coffee tells me her business is holding up, but she’s working the stand by herself more often, with fewer employees. Things are not so well elsewhere in this farming center. “The county is going to declare bankruptcy,” she says. “I don’t think it. I know it.”
California’s unemployment rate: 12.3 percent.
Now, in Carson City, a place I worked and knew well many years ago, the signs of trouble are manifest in shuttered shopping centers, a high foreclosure rate and a fence around the shell of what was once the largest casino in town.
Nevada’s unemployment rate: 14.3 percent, the worst in the state’s history.
By comparison, Washington state’s rate was 8.9 percent in July, with 8.4 percent in the Seattle-Tacoma-Bellevue metro area and 9.5 percent nationally. But add in part-time workers that want full-time employment and discouraged workers and the rate is more like 16 percent. Five applicants are chasing every job opening.
In other words, for four out of five unemployed Americans, there are no jobs. Nearly 49 percent of 16- to 24-year-olds are unemployed, the highest since record-keeping began in 1948. The loss of jobs for men has been the highest among the world’s 10 advanced economies. By most measures, it is the sickest labor market since the Great Depression.
Ill fares the land, indeed.
Labor Day began in the late 19th century as a celebration of unions; as a national holiday it was cleverly moved to the end of summer by politicians trying to deter radical May Day commemorations. Now few Americans in the private sector belong to unions and many are hostile to them, even as they enjoy the benefits purchased, often literally, by union blood.
A strike in Seattle by the Teamsters against Coke has received little attention. A long dispute in New York state between workers and a Motts apple-juice plant doesn’t resonate with Middle America, even though a highly profitable parent company wants to slash wages.
No, Labor Day became just another holiday. And in the harsh aftermath of the Great Recession, it is a time to take stock of two countries: one with jobs, and another without them, with the border between the two perilously fragile.
Carson City illustrates how the employment crisis can’t be separated from the collapse of the real-estate bubble. True, the northern Nevada gambling industry has been hurt by tribal casinos opening in California. But the real problem is the state was ground zero for overbuilding, speculation, liar-loan mortgages, the commercial real-estate swoon and all the wishful thinking and frauds that characterized the bubble. It was the most Nevada of things: The promise of something for nothing, striking it rich, unearned wealth.
From 2000 through 2008, the state clocked population growth of 32 percent. Carson City, with around 55,000 people, grew only around 5 percent (through 2006, the most recent data available). Yet the spec subdivisions and shopping centers spreading out into the sagebrush are astounding. Now construction, real-estate and mortgage jobs make up a huge portion of the unemployed. Carson was once known for its stability; its most recent unemployment rate is 13.2 percent.
Across the nation, the recession hit employment much harder than overall output. Recovery meant little help for workers. A new study by Andrew Sum and Joseph McLaughlin, of Northeastern University’s Center for Labor Market Studies, shows that while real GDP fell 2.5 percent from the fourth quarter of 2007 to the fourth quarter of 2009, nonfarm payroll employment fell by 6 percent. Workers were cut at a much higher rate than in most other advanced economies, including Germany and Japan.
While pretax corporate profits declined 18 percent in 2008, by the first quarter of this year they had risen 57 percent above fourth-quarter 2008 levels. Adjusted for inflation, the average worker received no increase in real weekly earnings. Sum and McLaughlin write that the recovery has produced “the most lopsided gains in corporate profits relative to real wages and salaries in our history.”
The biggest cause of the profit rebound is increased worker productivity, not real output; yet unlike other recoveries, employees are seeing few of the benefits of their efforts.
In addition, the study shows U.S. unemployment has gone from second-lowest among advanced economies in 2000 to worst in 2009.
Optimistic economists project a mid-decade point where all the jobs lost in the recession are recovered — barring a double-dip. The causes of the trouble are complex, going beyond the bubble to lost manufacturing and even the shattered social compact that existed in post-World War II America.
Political deadlock prevents bold job-creating investments in advanced infrastructure. A large federal government already supports or subsidizes vast numbers of jobs, including in the defense and agribusiness sectors. Trade deals that kill jobs and policies that encourage sending jobs overseas are untouchable.
So Labor Day 2010 sees America waiting for the old bubble economy to somehow revive. I’d call it a gamble.
You may reach Jon Talton at email@example.com