This article was originally published in MarketWatch.
The economy added 114,000 jobs last month, on top of an upward revision of 86,000 jobs to July and August. The private sector has added jobs for 31 consecutive months.
After coming into office in depths of the Great Recession, President Barack Obama has seen more than a million private-sector jobs created over his first term. For the first time since he took office, the unemployment rate is below 8%, hitting 7.8% in September.
It is clear that the American Recovery and Reinvestment Act of 2009, support for the auto industry, and other policies implemented in the 111th Congress in 2009 and 2010 were the right path forward.
Returning to supply-side economic policies, as Republican presidential candidate Mitt Romney advocates, will not only stymie job creation but also risk pulling the economy backward, as these were the very same policies that got us into this mess in the first place.
Deficit spending has been effective in boosting job creation. In 2008 the economy began hemorrhaging jobs, and by the winter of 2008–2009, the economy was shedding more than 20,000 jobs per day, more than at any point since the Bureau of Labor Statistics began tabulating these data in 1948.
The Recovery Act led to a rapid reversal in the number of layoffs, and starting in March 2010, the economy saw jobs being added each month.
Since February 2010 the economy has added 4.3 million total payroll jobs, which rises to 4.6 million if we include the additional 386,000 jobs created as of March 2012, according to preliminary data from the Bureau of Labor Statistics’ annual benchmark revision process. Including the revisions, private payrolls are up more than a million since the inauguration.
The Recovery Act not only provided a needed boost to demand but it was the right thing to do for the millions of families left without a breadwinner when the financial industry imploded.
Moreover, during the dark days of the Great Recession, in 2008 and 2009, the U.S. automobile industry looked like it might collapse. The federal government, however, stepped in and provided $80 billion in aid, with a clear plan for those funds to be repaid. So far, about half of these grants and loans have been repaid and the automobile industry has added 152,300 jobs since June 2009.
Even as private-sector jobs have grown, however, the decline in public-sector employment is holding our economy back. The economy has lost nearly 700,000 public-sector jobs since April 2009. Our unemployment rate would be at least a full point lower without those losses. Since the Republicans took control of the House of Representatives in 2011 they have blocked all efforts to help support public-sector jobs for teachers, police officers and fire fighters.
Last month’s decline in the unemployment rate was driven by large reported employment gains, with 873,000 people indicating they got a job in September. This is an exceptionally large one-month gain in reported employment, and therefore we should interpret it carefully.
Higher employment is consistent with data from the establishment survey, however, and while the pace of reported employment in the household survey will likely be slower in the months to come, it is clear that employment is rising.
There are other indications that more people are finding employment: The share of those who are out of work who voluntary quit their job, rather than getting laid off, rose to 7.9%, and the number of discouraged workers fell from just more than a million down to 802,000 over the past year. However, 582,000 people newly indicated they were working part-time because of slack work or business conditions, which means that not all those finding work are finding the kind of work they would like to have.
Both men and women reported increased employment, with 67.5% of adult men (ages 20 and over) reporting having a job in September — up from 67% a year ago — and 55.1% of adult women reporting having a job — up from 55% a year ago. Employment grew most for workers with some college or more, while falling for workers with only a high school diploma.
Alongside hiring, wages grew by 7 cents in September for an annualized quarterly rate of growth of 1.6%. However, this means workers are not seeing real earnings gains, as the rate of inflation over the past year — as measured by the consumer price index for all urban consumers — rose by 1.8%.
In short, in the wake of a massive recession caused by a financial crisis, like the one we have lived through in recent years, the best antidote to high unemployment is deficit spending until the unemployment rate comes down.
Heather Boushey is a Senior Economist at the Center for American Progress Action Fund.