U.S. jobs rout should give fiscal hawks pause
By Agnes T. Crane and Christopher Swann
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
The latest U.S. jobs report should give fiscal hawks pause. With economists expecting employment to rise by a modest 100,000 in June, the piddling increase of 18,000 proved a bitter blow for a country amid the throes of an austerity debate.
Last month’s gloom was compounded by a dip in wages. And more than 250,000 people gave up the job hunt altogether. At this rate, it would take over three decades to recover the 7 million jobs lost during the recession.
At the root of the problem is the reluctance of private firms to hire, despite a strong rebound in profits since the financial crisis. The 57,000 positions they added to payrolls in June was less than half of expectations. And a fall in temporary positions and the number of hours worked may point to further weakness in the months to come.
Still the continued bleed of public sector jobs — 39,000 more last month — is also proving a powerful drag. Over the past year, constrained federal, state and local governments have dumped 659,000 jobs. That has offset more than a third of the gains by businesses small and large. This should not be lost on lawmakers in Washington, who are in full combat mode over budget deficits.
Chronic shortfalls have taken their toll. State and local authorities have already been forced to make painful cuts, including in education, to offset falling revenue and the end of Uncle Sam’s generous stimulus packages. Now it’s the federal government’s turn.
Democrats and Republicans are fiercely debating the best way to cut as much as $4 trillion from the budget over the next decade. If tax increases are off the table because of their potential to inflict further pain on the job market, deep spending cuts will be the only way to narrow the deficit gap.
Yet this solution could easily leave more Americans jobless. That makes the structure of the plan especially significant. Belt-tightening may be inevitable but should be heavily back-loaded. It became painfully apparent on Friday that the private sector isn’t ready to absorb the swelling ranks of the unemployed. The government can ill afford to make the line longer.