Adding to the difficulty of a jobs recovery is the depth of the problem. Some 7.3 million jobs have been lost since the recession began in December 2007, and the labor force is growing by more than a million people per year. Yet the biggest year for job creation in the past three decades was 1984, when 4.3 million workers were added to US payrolls.
What can be done to get that kind of jobs rebound? Ideas span from the restrained – based on concern that federal budget deficits are growing dangerously large – to the ambitious:
Just wait, jobs will come back. The first Obama administration stimulus package of $787 billion is still only partly spent. That, plus a nascent consumer recovery, will generate job growth next year, some economists say. And there’s this tough-love recipe for jobs: Let US wage rates adjust downward, so that the demand for labor comes into balance with supply. That’s a process that tends to be slow, however.
Help credit to flow. The Obama administration is working on several fronts to expand lending activity, including through the Small Business Administration’s loan programs. But some economists say more efforts are needed to repair channels of credit that broke down during the recession.
Tax credits. As it did with incentives this year for people to buy cars or houses, Congress may dangle cash in front of employers who hire. The liberal Economic Policy Institute estimates that if the Treasury refunds 15 percent of new wage costs in 2010, and 10 percent in 2011, the result could be 3 million jobs next year and 2 million in 2011. Some experts argue the credit won’t be that successful.
Emphasize tax cuts and free enterprise. On the political right, economists would take the idea of a temporary tax break for hiring a step further. They say business and household confidence will get a bigger boost from permanent reforms to the tax code. This could increase incentives to hire, while reducing the risk that future tax hikes or government borrowing will put a drag on economic activity.