Fed Issues Sobering Look at Current Economic Recovery

For many practitioners, the quickest summary of a recent 16-page analysis from the Federal Reserve Bank of New York might be "something has to change." Looking at job creation since the recovery began three years ago, Richard Freeman and William Rogers III state in The Weak Jobs Recovery: Whatever Happened to "The Great American Jobs Machine"? that this is the worst recovery in all post-World War II recoveries.

The analysis states 17 months of job growth since August 2003 has barely kept pace with increases in population. As a result, "It would take employment growth of some 300,000 per month over the next year and a half to bring the employment-population rate to the 64.4 level it held during 2000." The monthly average since August 2003 has been less than half that at 146,000. And that figure is even underwhelming in that other research, the authors point out, indicates as much of 30 percent of all job growth since 2001 has been temporary-help services.

The negative news keeps coming in other key findings of the report:

• Slow jobs growth is not due to weak performance among a particular sector, such as ICT and the dot-com bubble burst.
• Employment growth was down among groups particularly vulnerable or sensitive to business cycle swings, African Americans, new labor market entrants, out-of-school youth and less educated workers among them. The authors note that "new entrants with no more than a high-school degree have borne the largest brunt of the weak recovery."
• The jobless recovery has no particular geographic dimension. States enjoying the greatest job growth are doing it at a slower rate than previous recoveries while some states - Ohio and Michigan are mentioned specifically -- are seeing real declines in employment while experiencing economic recovery.

So what unplugged the great American jobs machine? Freeman and Rogers raise questions for six possible factors before positing that the fundamental relationship of the labor market to the U.S. economy is changing in ways yet unexplained: U.S. performance in the international economy (the trade deficit); the impact of health care costs; weak reactions to fiscal stimuli such as tax cuts and increased government discretionary spending (mostly defense and security related); structural change to the economy; and greater uncertainty.

The Weak Jobs Recovery: Whatever Happened to "The Great American Jobs Machine"? is available at: http://www.newyorkfed.org/research/epr/forthcoming/freeman.pdf

SSTI Annual Conference plug:  For most readers, this article probably is a bit of a bummer. Sorry. But it represents the real challenges facing states and communities attempting to improve the standard of living and economic well-being of their residents through tech-based economic development (TBED). The economy we find ourselves in today is radically different than that in place when most state economic development strategies were adopted. The hype and impact of information technology and the Internet in the late 1990s may have been called "the new economy," but this current economy is unlike anything this nation has ever seen before.

As this article led off, something must change. Perhaps everything. SSTI's annual conference, to be held in Atlanta on Oct. 19-21, will provide the first and greatest opportunity for TBED practitioners from across the country to convene to discuss what is happening and the best strategies for capitalizing on the new globalization. We've titled the conference appropriately, Investing in a Brighter Future: Building Tech-based Economies. The brightest minds in the field will be there. Will you?

More information is available at: http://www.ssti.org/conference05.htm