Are you worried about losing your job? Media reports certainly suggest you should be. The unemployment rate jumped again last month to a five-year high. Stories about job losses fill the news.
Many politicians claim America is in a recession (that only they can get us out of!). Large numbers of Americans understandably worry that a pink slip could arrive at any time.
Fortunately, these fears are largely unfounded. The vast majority of American workers are not at risk of being laid off. America is not in a recession. Though the economy is hardly booming, it has grown modestly since the start of the year. Contrary to political rhetoric, America isn’t in an economic crisis.
America does face serious economic challenges. The collapse of the housing bubble, like the collapse of the tech bubble before it, has cut the wealth of American households by trillions of dollars, and many Americans are at risk of foreclosure. The high cost of energy has taken a bite out of everyone’s pocketbooks. As the economy has absorbed these blows, the unemployment rate among adults has shot up a full percentage point since Jan. 1.
But conditions are less dire than they appear. Relatively few workers who already have jobs are losing them. Employers are no more likely to lay off employees today than a year ago. Just one-third of that increase in the unemployment rate occurred because employees lost their jobs.
Most of the unemployment uptick occurred because new workers entered the labor force but couldn’t find work. Employers have put the brakes on new hiring. Hire rates have fallen 10 percent since last December. Difficulty finding work is painful, but less so than good workers being unexpectedly let go.
The majority of the job losses are in sectors affected by the housing bubble and soaring energy prices: residential building construction, auto manufacturers and dealers, credit institutions and home-building supply stores. These industries account for three-fifths of the net job losses this year. Job losses in employment services, such as temporary help agencies, account for most of the rest. Companies are choosing not to hire temporary workers, but few sectors are letting workers go.
Workers also have much better job security now than in past downturns. For all the talk about globalization meaning the end of job security, economic research shows the opposite: Workers are much less likely to be laid off from their jobs now than in the past. Workers are more than a third less likely to lose their jobs now than in the recessions of the 1970s and early 1980s.
America has faced much more serious problems in the past. If you have a job today that isn’t directly affected by housing markets or energy prices, you have little to fear from reports of rising unemployment.
That’s not to say these aren’t challenging times. Difficulty finding a job causes families financial and emotional distress. Rising food and energy costs have cut workers inflation-adjusted wages.
What should be done? Many members of Congress are proposing a second stimulus package, but this would do little to help. Even if most of the “stimulus” proposals weren’t pork projects masquerading as economic assistance, another stimulus package wouldn’t address the real problem: high energy prices and the housing bubble.
Congress can’t do anything more to fix the housing bubble than it could the tech bubble. (How productive would it have been to use your tax dollars to prop up the price of Pets.com and other worthless tech stocks?) But lawmakers can address the cost of energy.
Fortunately the price of gas is already dropping. Congress can send prices even lower by ending the offshore drilling ban and allowing the development of unconventional oil reserves in Colorado and the West. Congress also can immediately end the ethanol mandate, which requires all gasoline sold to include more expensive corn-based ethanol. Not only would this make gas less expensive, it also would cut food prices. Researchers at the World Bank estimate Congress’ decision to turn one-quarter of the U.S. corn crop into fuel accounts for most of the run-up in global food prices.
Congress shouldn’t pass a stimulus package that won’t address our real challenges. It should act to make energy more affordable. If members can’t do that, maybe they’re the ones who should worry about pink slips.
James Sherk is the Bradley Fellow in Labor Policy at the Heritage Foundation (heritage.org).