Jumpstarting employment growth

The question is: What can those statistics teach us as we pursue the president’s mandate to do all we can to jumpstart the American jobs machine? It turns out the data are pointing in an interesting direction, and President Barack Obama is anxious to go there.

{mosads}First, let’s assess the impact of our jobs initiatives thus far. According to a wide range of estimates from independent sources, the Recovery Act created or retained as many as 2 million jobs through the end of last year. Obviously, that’s not enough to fill the hole blown in the job market by the deepest downturn since the Great Depression, but it has helped.

There’s a lot of political noise out there working to discredit the impact of the Recovery Act, but there’s simply no denying that it has saved hundreds of thousands of education jobs, put tens of thousands of construction workers back on crews, and most recently, helped plant the seed of some lasting investments in key Obama/Biden priorities, including clean energy, broadband and high-speed rail. And there are still a lot more jobs to come from the Act; only about half of its resources have been put to work so far in the economy.

But there’s also no denying that the Recovery Act has yet to turn this job market around. It has quickly and efficiently helped to staunch the bleeding — no small feat given the size of the wound. But the patient isn’t exactly up and running either.

The data help reveal why. Firms appear to have pulled back on layoffs, but they’re not doing much hiring. The pace of layoffs is slowing, but the pace of hiring is not speeding up fast enough to absorb active job-seekers, much less those waiting on the sidelines to jump into the labor pool when the water heats up. What’s keeping the unemployment rate so high right now is not so much folks coming onto the jobless rolls; it’s that people are stuck there.

Policy-wise, this reality points you in one of two directions. Kick back and wait for the economy to work out all the necessary “corrections” such that consumer and investor demands finally generate some jobs, or try to hasten that moment with targeted jobs programs.

The president isn’t willing to wait. He has proposed ideas in three areas, designed to boost hiring.

• Small-business tax cuts (including a zero capital gains rate), a credit targeted at jobs and wages, favorable terms on SBA loans, and use of TARP to encourage more lending to small businesses.

• A program that incentivizes homeowners to weatherize their homes, creates jobs for construction workers, improves energy efficiency, and reduces monthly energy bills. Also, a $5 billion expansion of a popular Recovery Act program that provides a 30 percent tax credit to manufacturers that invest in building the components of clean energy right here in the U.S., a potent “three-fer” that will incentivize domestic manufacturing investment and jobs, bring private capital in from the sidelines, and promote clean energy production.

• Investments in new infrastructure, building on successful investments from the Recovery Act.

We’re not the only ones thinking about jobs. The House recently passed a jobs package that shares many of the president’s ideas, along with some other good ones that we have consistently voiced support for, including a strong safety net for the unemployed and aid for strapped states and cities.

Importantly, all of these expenditures are short-term, lasting a year or two, so they add little to the debt. In fact, generating more growth, which spins off more revenue, is unquestionably the best way to address the deficit right now.

One year ago, our new administration was met at the door by a deep and protracted recession. Our initial imperative was to pull back from the brink, stabilize key markets, arrest the devastating trends, and start saving and creating jobs.

Now, we must complement these broad strokes by incentivizing job creation, freeing the flow of capital to businesses ready to respond to the nascent recovery, and spurring investment and job creation in the clean energy sector.

We’ll aggressively pursue these ideas and we’ll continue watching the data to see how our efforts are working. Behind each one of those data points is a person, a family, a community trying to get back on their feet, and there is no more important task than to help them do so.

Bernstein is the chief economist to Vice President Joe Biden.