Vanishing Jobs

By TOM RAUM

Associated Press Writer

WASHINGTON (AP) - Even with an economic revival, many U.S. jobs

lost during the recession may be gone forever and a weak employment

market could linger for years.

That could add up to a "new normal" of higher joblessness and

lower standards of living for many Americans, some economists are

suggesting.

The words "it's different this time" are always suspect. But

economists and policy makers say the job-creating dynamics of

previous recoveries can't be counted on now.

Here's why:

- The auto and construction industries helped lead the nation

out of past recessions. But the carnage among Detroit's automakers

and the surplus of new and foreclosed homes and empty commercial

properties make it unlikely these two industries will be engines of

growth anytime soon.

- The job market is caught in a vicious circle: Without more

jobs, U.S. consumers will have a hard time increasing their

spending; but without that spending, businesses might see little

reason to start hiring.

- Many small and midsize businesses are still struggling to

obtain bank loans, impeding their expansion plans and constraining

overall economic growth.

- Higher-income households are spending less because of big

losses on their homes, retirement plans and other investments.

Lower-income households are cutting back because they can't borrow

like they once did.

That the recovery in jobs will be long and drawn out is

something on which economists and policy makers can basically

agree, even as their proposals for remedies vary widely.

Retrenching businesses will be slow in hiring back or replacing

workers they laid off. Many of the 7.2 million jobs the economy has

shed since the recession began in December 2007 may never come

back.

"This Great Recession is an inflection point for the economy in

many respects. I think the unemployment rate will be permanently

higher, or at least higher for the foreseeable future," said Mark

Zandi, chief economist and co-founder of Moody's Economy.com.

"The collective psyche has changed as a result of what we've

been through. And we're going to be different as a result," said

Zandi, who formerly advised Sen. John McCain, R-Ariz., and now is

consulted by Democrats in the administration and in Congress,

Even before the recession, many jobs had vanished or been

shipped overseas amid a general decline of U.S. manufacturing. The

severest downturn since the Great Depression has accelerated the

process.

Many economists believe the recession reversed course in the

recently ended third quarter and they predict modest growth in the

nation's gross domestic product over the next few years. Yet the

unemployment rate is currently at a 26-year high of 9.8 percent -

and likely to top 10 percent soon and stay there a while.

"Many factors are pushing against a quick recovery," said

Heidi Shierholz, an economist at the labor-oriented Economic Policy

Institute. "Things will come back. But it's going to take a long

time. I think we will likely see elevated unemployment at least

until 2014."

At best, many economists see an economic recovery without a

return to moderate unemployment. At worst, they suggest the fragile

recovery could lose steam and drag the economy back under for a

double-dip recession.

"We will need to grind out this recovery step by step,"

President Barack Obama said earlier this month.

Obama and congressional Democrats are having a hard time

agreeing on how to keep the recovery going and help millions of

unemployed workers - short of another round of stimulus spending

amid rising voter alarm over soaring federal deficits.

So far, they've been unable to win even a simple three-month

extension of unemployment insurance for people in states with

jobless rates above 8.5 percent.

The extension easily passed the House earlier this month but is

bogged down in the Senate over disputes over which states would get

the funds. Hundreds of thousands of people have already lost their

benefits or are about to lose them.

The White House credits the president's $787 billion stimulus

plan passed in February for keeping job losses from becoming even

worse. Since Obama took office in January, the economy has lost 3.4

million jobs.

Republicans argue that the stimulus program has not worked as a

job producer and is a waste of tax money. And last week, the U.S.

Chamber of Commerce launched a multimillion advertising campaign to

celebrate small business entrepreneurs - and to argue that further

government intervention will not spur permanent job growth.

Chamber leaders called for creation of more than 20 million new

private-sector jobs over the next decade, saying it's needed to

replace jobs lost in the recession and to keep pace with population

growth.

"The government can support a few jobs in the short-run" while

free enterprise is the only system that can create 20 million of

them, said Thomas Donohue, the chamber president.

To many economists, such a goal seems unreachable given today's

altered economic landscape.

"It's a new normal that U.S. growth is going to be anemic on

average for years. Right now, the prospect is bleak for anything

other than a particularly high unemployment rate and a weak

jobs-creating machine," said Allen Sinai, president of Decision

Economics Inc. He says he doubts that unemployment will dip below 7

percent anytime soon.

Many economists consider a jobless rate of 4 to 5 percent as

reflecting a "full employment" economy, one in which nearly

everyone who wants a job has one. After the 2001 recession the rate

climbed to 5.8 percent in 2002 and peaked at 6.3 percent in 2003

before easing back to 4.6 percent for 2006 and 2007.

Will unemployment ever get back to such levels?

"I wouldn't say never. But I do think it's going to be a long

time," said Bruce Bartlett, a former Treasury Department economist

and the author of the book "The New American Economy: The Failure

of Reaganomics and a New Way Forward."

"The linkage between growth in the economy and growth in jobs

is not what it was. I don't know if it's permanently broken or

temporarily broken. But clearly we are not seeing the sort of

increase in employment that one would normally expect," said

Bartlett.

(Copyright 2009 by The Associated Press. All Rights Reserved.)