Today the Bureau of Labor Statistics released its January numbers. January's unemployment rate fell to 9.0%. While that number offers a mixed picture of the economy, the fact remains that we are in a marathon not a sprint; recovery and jobs creation remain slow -- though steady.
As President Obama noted in last week’s State of the Union address, our country’s biggest immediate challenge unquestionably remains job creation – putting Americans back to work so that the economy can grow strongly again. But with a somewhat disappointing December jobs report, it’s clear that the economy is not producing jobs quickly enough to foster sustained economic growth.
In his State of the Union speech to the nation, President Obama stated that, "We have to make America the best place on Earth to do business." Currently, however, there are 14.5 million Americans unemployed and millions more that are under-employed. That number must come down dramatically before we can be confident in sustained economic growth.
To his credit, President Obama seems to have moved job creation up on his priority list. The appointment of Richard Daley as Chief of Staff and Jeff Immelt of GE as a key advisor, are key examples. Building on those additions, the President spent the largest portion of his State of the Union address discussing ways he and Congress can come together to create systemic change to our economy.
The president and Congress however, have their work cut out for them. In order to return to a 5.6 percent unemployment rate, which was last experienced in 2007, we need to create at least 6.7 million jobs without considering population growth. To put this in perspective, we created just shy of 1.3 million private sector jobs in 2010. At that rate, it will take five years. Even if we can create jobs at three times the rate of December’s job growth (increasing from 100k to 300k jobs/month), it will take two years. And by most accounts, this is very optimistic. It’s clear why job seekers have lost confidence.
While it can be argued that the stimulus likely kept the economy from a deep-dive depression or a double dip, there’s little evidence that it will be an effective stimulant for long-term job creation. There are many in the business community who rightly believe that the focus must be on the private sector. Regardless of industry or region, without a confident and motivated private sector, employers will not create jobs, at least not in America. There is an abundance of talent ready to work if given the chance. The new Congress should leave no stone unturned in considering legislation that will empower the private sector to create more American jobs, faster.
In addition to what the president proposed during the State of the Union, there are three other measures that can be taken that would boost employment in the short and long term.
1. Congress should address State Unemployment Insurance (SUI) rates for employers. Over the last two years, nearly every state has increased their average SUI rates charged to employers for all employees.
While in the long term, states must fund unemployment payments to their residents, we are already seeing jobless claims decline. Instead of raising the costs for existing employees, we can let job growth at current SUI rates build back reserves. To this end, a temporary freeze should be placed on federal and state employer taxes for unemployment insurance funds.
2. Congress should immediately revise and extend the HIRE Act of 2010. The current structure that requires new employees to have been unemployed for 60 days or more does not offer an employer motivation to add jobs; rather it rewards employers that discriminate against those that are currently or have been recently employed. Companies do not make decisions to add jobs based on this current incentive; they can only make a decision to select one person over another. If the HIRE Act applied to all new hires, employers could act with certainty knowing that all new hires would enjoy the same temporary savings.
3. Finally, with regard to taxes, Congress has gone part of the way. By extending tax reductions for individuals, Congress recognized the important role that small and medium businesses in America play in job creation. By some estimates, 70% of job growth will come from small and medium businesses. This extension is necessary but not sufficient. Congress should permanently establish these tax rates. In addition, taking the next step to reduce corporate taxes will also improve the business case for larger companies to grow and hire in America, instead of incentivising them to grow their business offshore.
These three simple things could go a long way to jump starting job creation in 2011. Congress has a limited window in 2011 to pass effective legislation that will spur the economic and job growth that we so badly need. Always an optimist, I hope Congress and the Administration will put partisanship aside and come together in order to enact legislation that will make a difference in the lives of all Americans, especially the 14 million Americans in search of their next job.
Tig Gilliam is CEO of Adecco Group North America, the world's largest temp agency.