Saturday, September 4, 2010

Why have higher unemployment rates become the new norm?

Two basic facts will tell you most of what you need to know about the political picture today.
Fact One: The unemployment rate is the most important of all leading political indicators.

Fact Two: If the August unemployment number to be announced Friday tops 9%—which seems highly likely—the jobless rate will have been above that level for 16 straight months. Already, the U.S. is mired in the longest such stretch of 9%-plus joblessness in more than a quarter of a century.

There is little mystery, then, about why Democrats are in trouble. The party in power is inevitably blamed for so much bad news on the one economic subject that most concerns average Americans.

Yet the political debate on this point, which focuses on what can be done to get Americans back to work right now, is missing a deeper and more troubling reality: The American economy hasn't been a very robust jobs-producer for quite a while. That's the broader question that needs to be discussed, even as we work on the immediate problem.

Indeed, it has been perhaps four decades since America's economy has been the kind of roaring jobs machine that average Americans, aspiring politicians and ambitious business leaders all would like to see. Consider a few historical unemployment-rate numbers—one way to gauge the economy's performance on the jobs front.

Between 1966 and 1970, the U.S. experienced a phenomenal stretch of 48 straight months in which the unemployment rate was at or below 4%—that is to say, a stretch of four straight years when the rate was less than half of what it has been for the past year.

In the three decades since 1970, the rate has fallen below 4% for exactly four months, in the final months of 2000.

Instead, the norm has become unemployment rates in the 5%-to-7% range.

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