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DANIEL VAUGHAN: Nearly a decade after the Great Recession, Americans are still recovering
Last Friday, the Bureau of Labor Statistics (BLS) released one of the best jobs reports in years. Initial reporting says the U.S. economy gained a whopping 313,000 jobs in February. It’s one of the most massive gains in the recovery period, and the first 300,000+ job gain report since 2016.
But the positive report is also the latest sign that even though we’re nearly ten years into a recovery, Americans are still picking up the pieces from the 2008 recession.
Instead of achieving an economy at full employment, we’re still pulling long-term unemployed citizens off the sidelines and granting them new hope. Aside from the historic 313,000 top-line number, the internal survey in the statement said that 806,000 Americans rejoined the labor force.
That led to the increase in the labor force participation rate, which is why the overall employment rate remained the same. The economy experienced a massive surge in people jumping back into the labor pool, and those people were finding jobs.
The most notable winners in the jobs report were the construction, manufacturing, and retail sectors, which created a combined 142,000 jobs. It’s sectors like this where you can see the Republican tax cut law working.
We’re witnessing businesses hire more employees and push significant projects forward. Tax reform lowered the costs of doing trade and made U.S. firms competitive globally.
Tax cuts are also proving to be the biggest difference for construction jobs. In previous years, it was harder to get approval for a project, but now, as construction firm Turner Industries attests, it’s easier:
The biggest difference is, after years of caution, businesses are approving projects at much faster rate, said Stephen Toups, executive vice president of Turner Industries, a Baton Rouge, La., construction company. He credited changes in the tax code for nudging customers to approve projects. Mr. Toup compared it to waiting for a drag race to start.
“For a long time, the economy was yellow, yellow, yellow,” he said. “Then the tax cut was announced. Green.”
While these firms are finally getting the green light, it’s a reminder that even with all this growth, we’re still recovering from the Great Recession’s aftermath.
For construction and manufacturing firms, while the lower tax rates give them the green light, the potential for tariffs and trade wars risks increasing their costs and halting projects.
“Steep tariffs on steel and aluminum will add to rapidly rising materials costs,” Ken Simonson, chief economists for the Associated General Contractors of America, said. “The combination of higher materials and labor costs could push some contractors out of business and make many projects unaffordable.”
Every policy decision has a consequence — some foreseen, others unforeseen. In the case of steel and aluminum tariffs, the costs are readily seen, and the industries they impact are measurable.
People with jobs and lives depending on the green light of new projects will feel the pinch of tariffs first.
Contrary to the popular wisdom of Wall Street, we also don’t know how much more the economy can grow. Mainstream TV economists argue we don’t need any of the stimulus provided by tax cuts and the economy is already at full strength.
But the counter to that argument consists of two observations. First, if you include broader statistical measures of unemployment, we’re still above pre-Great Recession levels of unemployment.
We haven’t hit the lows of the mid-2000’s or the lows from the year 2000, before the dot-com bubble and pre-9/11 recession. That means we still have more room to grow by those measures.
Second, no economist has a firm grasp on whether or not the labor force participation rate — the total percentage of Americans in the workforce, searching for a job — is at a historic low because of structural issues, or because firms aren’t hiring them.
If we were at full employment, you would expect wage growth to follow, because there would be fewer workers than jobs available, giving employees more leverage in salary requests.
But wage growth is stagnant, and as the latest jobs report shows, it’s possible for the labor force participation to rise. In one month more than 800,000 Americans rejoined the workforce.
How many more Americans can we pull off the sidelines? How many more people can we give the hope of full-time employment?
We don’t know the answer to that question. Central planners least of all know that answer, though they pretend.
The Great Recession altered the American economy in ways we’re still learning about and processing. We were told and sold the notion, for eight years, that America had entered a new normal, where stagnant growth for jobs and wages was just the new reality.
Tax cuts gave the economy a new hope, a new green light. We should take this shot to expand the workforce and bring those forgotten in the Great Recession back into the fold.
But we should also understand how fragile this growth is, and not pursue rash policies that harm those same workers. As long as we seek pro-growth policies, we don’t have to pretend the old new normal is our standard.
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