That perception and expectation began to waiver this
winter. We finally had some job growth in March. And
consumers are looking to some increase in jobs, modest
though they might be, which will lead to an increase in
consumer income growth — but back up to where we
were last autumn.
At this point, we are still at levels normally associated
with the late stages of a recession than an economy six
months into an expansion.
GCX: Why does this continue to happen?
Goldstein: The big factor is how deep a hole we
fell into with this recession, especially with respect to
jobs. When we look at what happened to job losses in this recession
compared to the recessions of the
mid 1970s and early 1980s, we
went much further down in terms
of how many jobs were lost this
time around.
Nationally, we have 15 million
people out of work; we have 9
million people who are working a
part-time job with full-time bills;
and we have another 1 million
people who were looking for jobs
and did not find them so they
stopped looking.
The good news is that in March
we actually gained 180,000 jobs. This
figure does not include the temporary
U.S. Census workers. Even with an
average of 180,000 job additions a
month, or even 200,000 jobs, if we
got that consistently, with that many
people out of work and looking for
a job, we are talking about half a
decade before we reduce the elevated
unemployment rate.
Consumers understand that what
took a long time to lose is going to
take a long time to recover. And the
associated factor with this is the
structural change unfolding. The
average consumer having gone
through this, looking at we could be
facing, is essentially saying: “I need
a bigger piggy bank.”
The structural change runs from
a zero or less than zero percent sav-
ings rate to a 3 percent to 5 percent
savings rate. And the arithmetic here
is that the money being saved is
money not being spent. And when
two-thirds of the economy is based
on consumption that is one reason it
will take a long time for the economy
and the labor market to recover.
GCX: Speaking of piggy banks, what is the status of
stimulus funds the federal government released and what
do businesses need to understand about the funds?
Goldstein: A lot of the stimulus money is going to cut
out or wind down starting this summer. Another factor is
we got to where we are today in part because we spent so
much money on all of those different programs, most of
which are slowing or coming to an end.
One point I would like to make is in regard to state-level unemployment funding. Because funding is running
low and because states cannot run deficits, states will be
forced to either raise their employer tax for their employees for FICA, and/or cut the benefits. In some places the
