More state stimulus relief on its way?

by Paul Grasso, December 15, 2009

While there are signs of economic recovery on Wall Street, the unemployment lines on Main Street have yet to shorten. The unemployment rate nationally is currently 10% and is estimated by some to peak at about 11% next summer. Although, the national unemployment rate for November dropped from 10.2% to 10%, President Obama was still concerned enough to host a Jobs Summit at the White House this month. The invitation list included a mix of business leaders and academics. Notable by their absence were two groups that are prominent in advocating on behalf of small businesses, which many recognize as the engine that drives job growth.

Leading up to the meeting, President Obama recently outlined his Jobs Plan as an extension of his $787 billion stimulus plan. The President called for "relief to states and localities to prevent layoffs." The precise nature of this relief is subject to negotiations with Congress, but is thought to include two items most valuable by state governments - an extension of unemployment insurance, and more money for infrastructure projects.

One bill would cost $100 billion and extend unemployment insurance, temporary food-stamp payment increases, and subsidies for health-care purchases by the unemployed. The second infrastructure-related bill would cost about $70 billion and would likely take well into 2010 to flow through the infrastructure budgeting pipeline. These include proposals for up to $50 billion in spending on highway, bridge and other infrastructure projects, and new incentives for those who make their homes more energy efficient.

Suggestions for accelerating job creation ranged from tax incentives for companies that create new jobs, another stimulus package, more money for beleaguered states and local governments, to even a scaled-down version of New Deal government public works programs of the 1930s. There is yet to develop a consensus on how to proceed on grander job creation incentives, except that a multi-faceted approach will be needed.

Part of the difficulty facing the administration is that recent post-recessionary job growth has been slow. While jobs returned relatively quickly after the 1982 recession, it was 14 months after the relatively mild recession 1992 and a staggering 24 months after the 2001 recession before job growth returned to pre-recession levels.

The reason may be that in today's global economy, businesses are able to move activities worldwide to cut costs. Today's businesses increase productivity through automation and with information technologies. Further complicating the problem is that the construction and auto industries, the traditional economic engines that helped pull the U.S. out of most recessions in the late 20th century, have been severely weakened in this latest recession.

The question remains - what industries will lead us through the job recovery?

Labor Market Information

Unemployment Statistics (NYSDOL Data)

 

Labor Market Overview (NYSDOL Data)

In October 2009, the number of seasonally adjusted private sector jobs in New York State decreased by 12,700, or 0.2 percent, to 7,055,100. Since the New York State economy went into recession in August 2008, the state's private sector job count has declined in 13 of the past 14 months. The statewide total nonfarm job count (private plus public sectors) also decreased over the month -- by 15,300, or 0.2 percent, to 8,549,000 in October 2009.

Between September and October 2009, New York State's seasonally adjusted unemployment rate increased slightly from 8.9 percent to 9.0 percent, its highest level since April 1983. Comparisons to recessions before 1976 are difficult because this current data series goes back only to 1976.

The number of unemployed in the state also increased over the month, climbing from 867,300 in September to 872,000 in October, the highest level on record. "While employers in New York State continued to cut jobs over the past year, they did so at a more modest pace than those in the nation as a whole. In addition, the state's unemployment rate remained well below the nation's rate in October 2009," said Peter A. Neenan, Ph.D., Director of the Division of Research and Statistics.

Change in Jobs by Sector, October 2008 - October 2009

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According to the Bureau of Labor Statistics, one of the few industries where employment continued to grow during the recession has been health care, which added 29,000 jobs in October.  Employment in temporary help services rose by 34,000 over the month, the first significant increase in that industry since the start of the recession in December 2007.  It may be an indication that as the private sector begins to create jobs; employers may be looking to temporary services as a way of protecting themselves in the event of a "double dip" recession.  If the economy remains strong, the jobs would become permanent.

 

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