Joshua Meltzer, David Steven and Claire Langley in The United States After the Great Recession: The Challenge of Sustainable Growth (Brookings Institution) write:
“Never before has our nation enjoyed, at once, so much prosperity and social progress with so little internal crisis and so few external threats,” President Clinton argued in January 2000 in his final State of the Union address.
Despite this optimistic prognostication, the millennial decade was one of profound crisis, with serious consequences for the United States’ economy and society, and for the environmental sustainability of the American dream.
An intelligent design would lead the U.S. to place greater value on sustainability at national and global levels, adopting reforms that begin to push its economy onto a new trajectory. And Increasing employment, which is the most urgent priority to accelerate recovery from the Great Recession, while addressing underlying structural issues that have led to a decade of poor economic outcomes for most citizens.
Tackling the Jobs Crisis
Nearly 9 million jobs were lost in the Great Recession and its immediate aftermath.190 During the recovery, policy has had a modest impact on increasing employment, with the Congressional Budget Office estimating that the Recovery and Reinvestment Act has led to between 0.2 and 1.2 million additional people in current employment, with a peak impact on employment at the end of 2010.191 At the state level, labor markets were strongest in those states that increased government expenditures fastest between 2007 and 2010.192 But the federal stimulus spending created jobs at an estimated cost of $125,000 per job.193
As noted by Ben Bernanke, chairman of the Federal Reserve, “the rate of improvement in the labor market has been painfully slow.” At the rate of job creation in the 2000s, it would take until 2020 to fill the current jobs gap, with Bernanke blaming the troubled housing sector, fiscal contraction at the federal and state levels, and financial stresses in the eurozone. The Federal Reserve, tired of waiting for Congress to act, launched a new round of quantitative easing (QE3) based on its expectation that economic growth will not otherwise “be strong enough to generate sustained improvement in labor market conditions.” This new commitment does not have a fixed end date but is tied to clear evidence that the labor market is improving. This marks an increased commitment from the Federal Reserve to “forward guidance,” signaling that it is prepared to boost aggregate demand (and, as a result, tolerate a higher inflation), until the economy has fully recovered.
Beyond the immediate economic crisis, the focus needs to shift to structural factors, through efforts to tackle long-term unemployment and geographical and skills mismatches between the labor market and labor force. During the recession, there was a substantial in- crease in the mismatch between available jobs and the skills of the workers available to fill them, with industrial mismatch accounting for about a third of the increase in unemployment (geographical mismatch did not play a significant role). Although this was primarily a cyclical phenomenon with levels of mismatch quickly returning to prerecession levels—mostly as a result of more rapid recovery in sectors such as construc- tion, manufacturing and retail that were fastest to shed jobs during the downturn—workers with obsolete skills are disproportionately likely to lose their jobs during a recession. Large numbers of workers have been un- employed for more than six months or have exited the labor force entirely. Most of these potential workers will lose skills and motivation the longer they are out of work, leading to what Ben Bernanke has warned of as “modest increase in the sustainable, long-run rate of unemployment,” with the natural rate of unemployment now estimated to have increased to between 5.2 and 6 percent.
A related problem is the long-term failure to generate sufficient jobs that support a middle-class income. At least in its early stages, the recovery has seen a further shift toward low-wage jobs, with mid-wage jobs ac- counting for 60 percent of the jobs lost in the downturn, but only 22 percent of those added in its aftermath. Looking forward, the workforce faces significant structural challenges. During the next decade, it will con- tinue to age, increasing the importance of participation rates of older workers. The skills gap is also likely to increase, with the McKinsey Global Institute projecting that in 2020 there will be about 6 million too few jobs for those who have not completed a high school education, though there is likely to be a shortage of workers able to fill jobs that require advanced technical degrees.205 The major priority is to address the skills gap (discussed below) while also:
• Implementing an emergency package for the long- term unemployed to increase their chances of find- ing work as the recovery proceeds, with the aim of bringing the natural rate of unemployment back down to about 5 percent.206 Options include targeted retraining schemes for the long-term unemployed or wage subsidies for employers who provide them with jobs, drawing on the more successful elements of Germany’s Hartz Reforms.
• Supporting the rebound of manufacturing after the recession, with the aim of creating middle-class jobs and supporting robust local economies. The future for United States manufacturing is in high-end indus- tries, which are likely to prosper as manufacturing becomes increasingly reliant on technology, less centered on mass production and less determined by access to cheap labor. This will require greater support for innovation.
• Capitalizing on the opportunities for growth that can be found in America’s cities, especially as they continue to experience rapid population growth. They have the greatest ability to escape partisan gridlock at federal levels, offering what Bruce Katz calls a “historic opportunity to usher in a new era of pragmatic, collaborative federalism that capitalizes on the economic power of metropolitan areas and the policy creativity of state and local leaders.” Katz proposes that the federal government fund state and metropolitan development strategies on a competitive basis and based on their contribution to national objectives, such as the goal of doubling exports.
Adapted chosen excerpts by Job Market Monitor from
Job Market Monitor 
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