GAO finds fault with stimulus jobs data but touts transparency - washingtonpost.com

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By Ed O'Keefe
Washington Post Staff Writer
Friday, November 20, 2009

Government auditors raised doubts Thursday about the number of jobs created or saved by the economic stimulus program, but they also said that mistakes reported in recent weeks signal the benefits of government transparency.

Roughly 10 percent of the recipients of stimulus dollars failed to submit quarterly reports last month, according to a Government Accountability Office report released Thursday.

"I think missing reports may drive the job numbers up, and I think there are enough inaccuracies in here to drive the numbers down," said Earl E. Devaney, who oversees Recovery.gov, the government's stimulus-tracking Web site. The Obama administration reported last month that the stimulus has created or saved about 640,000 jobs thus far.

Some recipients' failure to report spending data last month "is distressing and must be addressed," Devaney said, adding that Congress should penalize recipients who fail to report.

The doubts expressed by Devaney and acting GAO Comptroller General Gene L. Dodaro at Thursday's House oversight committee hearing lend nonpartisan credence to general concerns about stimulus data. Devaney, who assumed his position in the spring, has repeatedly cautioned government officials at all levels that early data would probably contain errors. But some of those mistakes aren't necessarily a bad thing, he said.

"In reality, this data should serve in the long run as evidence of what transparency can achieve," he said. "In the past, this data would have been scrubbed from top to bottom before its release. The agencies would never have released the information until it was near-perfect."

Republicans attacked the jobs figures, referring to the data as "propaganda" and "garbage," and called the entire stimulus reporting process "disgusting."

"The administration continues to misread the economy, misunderstand the nature of economic growth, mislead the American people with faulty jobs claims and miss the steps this country needs to take to get our economy back on track," said Rep. Darrell Issa (R-Calif.).

The Obama administration has struggled to clearly define stimulus job creation because -- as Devaney and Dodaro noted -- it is difficult to know what role the funding played.

"This has never been done before," White House stimulus adviser Ed DeSeve said after the hearing. "You can't name another government program that has done this."

Obama faces congressional anger about economy - washingtonpost.com

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ECONOMIC WOES TAKING A TOLL
House Republicans call on Geithner to resign

By Brady Dennis, Zachary A. Goldfarb and Neil Irwin
Washington Post Staff Writer
Friday, November 20, 2009

Growing discontent over the economy and frustration with efforts to speed its recovery boiled over Thursday on Capitol Hill in a wave of criticism and outright anger directed at the Obama administration.

Episodes in both houses of Congress exposed the raw nerves of lawmakers flooded with stories of unemployment and economic hardship back home. They also underscored the stiff headwinds that the administration faces as it pushes to enact sweeping changes to the financial regulatory system while also trying to create jobs for ordinary Americans.

President Obama's allies in the Congressional Black Caucus, exasperated by the administration's handling of the economy, unexpectedly blocked one his top priorities, using a legislative maneuver to postpone the approval of financial reform legislation by a key House committee.

Two buildings away, at a session of the Joint Economic Committee, Republicans escalated their attacks on Treasury Secretary Timothy F. Geithner, including a call for his resignation.

"Conservatives agree that as point person, you failed. Liberals are growing in that consensus as well," said Rep. Kevin Brady (R-Tex.). "For the sake of our jobs, will you step down from your post?"

Rep. Michael C. Burgess (R-Tex.) took a different tack. "I don't think that you should be fired," he told Geithner. "I thought you should have never been hired."

Even Sen. Charles E. Schumer (D-N.Y.), a friend of the administration, suggested that Geithner had been inconsistent in addressing China's practice of keeping its currency low against the dollar.

And Rep. Peter DeFazio (D-Ore.) said Wednesday on MSNBC that he thinks Geithner should step down, pointing to his handling of the aftermath of American International Group's meltdown.

Across Capitol Hill, senators signaled their opposition to rushing regulatory reform. While some Democrats voiced reservations about parts of the bill, Republicans went further, faulting Sen. Christopher J. Dodd (D-Conn.) for pushing ahead before the roots of the crisis were understood.

Perhaps most troubling for the administration was that one of the few measures to succeed Thursday was an amendment by Rep. Ron Paul (R-Tex.) that would subject the Federal Reserve to unprecedented scrutiny. The amendment, which won bipartisan support in the House Financial Services Committee despite the reservations of administration officials, would allow the Government Accountability Office to audit all of the Fed's operations, including its decisions on interest rates and its transactions with foreign central banks.

Paul and allies in both parties -- more than 300 members of Congress have endorsed the measure -- are looking to increase oversight of an institution they consider partly to blame for the financial crisis. Federal officials and many private economists worry that the amendment could make future central bank policymakers reluctant to take unpopular steps to prevent inflation or support the economy for fear of second-guessing by Congress and government auditors.

The House committee had been set to vote to send the final piece of its regulatory reform package to the House floor after months of debate. That is, until the committee's chairman, Rep. Barney Frank (D-Mass.), told a shocked committee room that passage of the bill would be delayed until Dec. 1 because the Congressional Black Caucus wanted the administration to do more to help African American communities suffering in the economic decline.

Frank told committee members that black lawmakers were "frustrated by the response to the economic situation by the administration." He said the caucus had no issues with the legislation itself. "They want obviously to continue to have some bargaining power with the administration," he said after the hearing.

The caucus itself did not publicly detail its concerns Thursday, but one member, Rep. Maxine Waters (D-Calif.), issued a statement: "The recession has created a unique systemic risk that threatens all parts of the African-American community, including the poor and the middle class."

The caucus began discussing its concerns with Frank and the administration several weeks ago. Frank hosted a meeting Monday night between caucus members, Geithner and White House Chief of Staff Rahm Emanuel.

"You're talking about people whose constituents have been badly hammered by this," Frank said. "Given the nature of this recession, there needs to be some more conversations."

Frank said the caucus had concerns about whether minorities were being fairly represented in helping carry out Treasury's bailout programs and other federal efforts to resolve the financial crisis. The government has contracted out much of the work to Wall Street firms.

Congressional aides said the caucus's concerns are similar to those of the Democratic Party's liberal wing. Caucus members are pushing for legislation that would directly lead to new jobs by providing tax benefits, for example, that would provide incentives for home renovations and funding for new infrastructure projects. They also want to extend health-care and unemployment benefits.

Meanwhile, Geithner was taking a beating as he urged Congress to pass regulatory reform as quickly as possible, arguing that delay would create uncertainty for businesses across the country. Lawmakers sharply criticized him for his role in the crisis during the tense Joint Economic Committee meeting. They were particularly critical of his involvement in the decision, as president of the New York Fed, to bail out AIG.

But Geithner pressed forward: "To ensure the vitality, the strength and the stability of our economy going forward, we must bring our system of financial regulation into the 21st century. Nobody in my job should ever be in the position again of having to come into a crisis like this without those basic authorities."

Dodd, chairman of the Senate Banking Committee, chose the marbled Caucus Room in the Russell Senate Office Building -- site of past hearings on Watergate, Pearl Harbor and the Wall Street abuses during the Great Depression -- to open debate on a massive draft bill designed to achieve the most ambitious reworking of the financial system in decades.

"This is one of those moments in our nation's history that compels us to be bold," Dodd said.

But soon, ranking committee Republican Richard C. Shelby (Ala.) took the floor, and for 18 uninterrupted minutes he opined that nearly every element of Dodd's bill was misinformed, uninformed, unnecessarily rushed or just plain flawed. "This committee has not done the necessary work to even begin discussing changes of this magnitude. Nevertheless, you have laid a bill before the committee," Shelby said. "I will be opposing this legislation. Not because we disagree on its ends, but rather on its means."

Shelby said Dodd was wrong not to conduct an investigation into the causes of the recent financial crisis before pushing forward with legislation. He said rather than ending the problem of institutions that are "too big to fail," the current bill expands the government's ability to bail out big banks. Shelby apologized for the length of his critique, expressed his hope that the two men might "yet find some common ground," and yielded the floor.

"Well," Dodd said in the morning's only moment of levity, "I thank you for the endorsement."

Staff writer David Cho contributed to this report.

N.A.A.C.P. Prods Obama on Job Losses - NYTimes.com

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By STEVEN GREENHOUSE

With unemployment among blacks at more than 15 percent, the N.A.A.C.P. will join several other groups on Tuesday to call on President Obama to do more to create jobs.

The organizations — including the A.F.L.-C.I.O. and the National Council of La Raza, a Hispanic advocacy group— will make clear that they believe the president’s $787 billion stimulus program has not gone far enough to fight unemployment.

They will call for increased spending for schools and roads, billions of dollars in fiscal relief to state and local governments to forestall more layoffs and a direct government jobs program, “especially in distressed communities facing severe unemployment.”

In speaking out on jobs, N.A.A.C.P. leaders say they are not trying to pick a fight with the first African-American president. Rather, they say, they are pressing Mr. Obama in an area where they believe he wants to be pressured.

“It’s time for us to really stoke this issue up,” said Hilary O. Shelton, the N.A.A.C.P.’s senior vice president for advocacy and policy. “We’re not so much trying to convince him to do something he doesn’t want to do, but urging him to move forward on an issue we have agreement on.”

African-American leaders say it makes sense to pressure the president on jobs because the unemployment rate for blacks has jumped to 15.7 percent, from 8.9 percent when the recession started 23 months ago. That compares with 13.1 percent for Hispanics and 9.5 percent for whites.

The black unemployment rate has climbed above 20 percent in several states, reaching 23.9 percent in Michigan and 20.4 percent in South Carolina.

In recent months, the N.A.A.C.P. has lobbied Mr. Obama on numerous issues, including the hate crimes bill and the Lilly Ledbetter Fair Pay Act, which makes it easier for employees to sue over pay discrimination. But this is the first time in Mr. Obama’s presidency that the organization is throwing its full weight into the economic debate.

It is being joined by another group that fought for civil rights during the 1950s and 1960s, the Leadership Conference on Civil Rights.

“Make no mistake, for us this is the civil rights issue of the moment,” said Wade Henderson, president of the Leadership Conference. “Unless we resolve the national job crisis, it will make it hard to address all of our other priorities.”

Mr. Obama has invited groups nationwide to voice their views and recommendations on jobs in preparation for his job summit next month.

“Obama keeps saying, ‘Push me to do the right thing,’ said Steven Pitts, a labor economist at the University of California, Berkeley. “I don’t see this as any break with Obama. The current political alignment of forces doesn’t support a new economic stimulus package. They’re trying to create an alignment of political forces to counteract that.”

Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute, a conservative group, said it was laudable that the N.A.A.C.P. and other liberal groups were pressuring Mr. Obama, although he said their call for additional stimulus was wrong.

“Everybody should pressure him,” Mr. Hassett said. “And it might be the conservative groups aren’t pressuring him enough, because they think maybe he won’t listen. I would hope the people pressuring the president would push away from the divisive type of recommendations that we need more of the same, that we need more stimulus.”

Mr. Hassett called for cutting taxes to create jobs and for reducing many workers to three-fifths or four-fifths time in work-sharing programs to avoid layoffs.

The Economic Policy Institute, a liberal research group, coordinated the jobs statement being released Tuesday, which will also be joined by the Center for Community Change.

“Despite an effective and bold recovery package, we are still facing a prolonged period of high unemployment,” the groups say. “Two years from now, absent further action, we are likely to have unemployment at 8 percent or more, a higher rate than attained even at the worst point of the last two downturns.”

The groups call for spurring private-sector job growth through tax credits and loans to small and medium businesses. They note that 17.5 percent of the labor force — more than 27 million Americans — are underemployed, including one in four minority workers. They say they expect one-third of the work force — and 40 percent of minority workers —to be unemployed or underemployed at some point over the next year.

“Americans are confronting the worst jobs situation in more than half a century,” the groups say. “This is not a situation we must continue to tough out. A robust plan to create jobs in transparent, effective, and equitable ways can put America back to work.”

Obama announces White House summit to focus on jobs - washingtonpost.com

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By Michael A. Fletcher
Washington Post Staff Writer
Thursday, November 12, 2009 11:00 AM

President Obama, grappling with the worst job market in a generation, announced plans Thursday to hold a White House jobs summit in December.

The forum, which will gather business executives, economists, financial experts and union leaders, will be aimed at examining initiatives to accelerate job creation, Obama said.

"We all know there are limits to what government can and should do even during such difficult times," Obama said. "But we have an obligation to consider every additional, responsible step that we can to encourage and accelerate job creation in this country."

Obama's announcement comes less than a week after the nation's jobless rate hit 10.2 percent, the highest level since 1983. The surging jobless rate -- which economists predict will continue to rise well into next year -- offers fresh evidence that the economy, though expanding, has not yet grown enough to create new jobs.

In his remarks, Obama credited steps his administration has taken to stabilize the financial markets and stimulate the economy for reversing the steepest economic slide the nation has experienced since the Great Depression.

But while the administration's policies have contributed to a rebounding stock market and overall growth in the economy, it has yet to reverse the slide in jobs. The president called the problem "one of the great challenges that remains in our economy."

White House aides said no date has been set for the forum. And Obama himself tamped down expectations for the meeting, saying that while he wants to hear new ideas for creating jobs, it is "important we don't make any ill-considered decisions even with the best of intentions, particularly at a time when our resources are so limited."

Economists have been projecting that job growth would resume early in 2010 and that the unemployment rate would begin to drop by the middle of the year. But that forecast is in doubt because job losses in the past few months are decelerating very slowly. The weak job market confronts the Obama administration with a difficult political situation. The economy grew at a 3.5 percent rate in the third quarter, as measured by gross domestic product, and the president and his advisers have presented this as evidence that their policies to arrest the downturn are working.

But 15.7 million Americans were unemployed last month, and many others were underemployed, contributing to growing skepticism about the president's economic policies. Public opinion polls have found that a majority of adults viewed Obama's policies as either making the economy worse or having no effect.

In recent weeks, Obama has taken smaller steps to continue stimulating the economy. Last Friday, the president signed legislation that extends unemployment insurance benefits by up to 20 weeks and renews an $8,000 tax credit for first-time homebuyers while expanding eligibility. Earlier, the administration backed a controversial $250 payment to senior citizens.

Rather than offering a short-term fix for joblessness, the White House has been focused on a difficult, longer-term strategy for improving the nation's job market.

The administration has backed huge investments to stimulate the renewable energy industry, as part of a plan to wean the nation off the debt-driven consumer economy that has fueled growth in the recent past.

During his meetings with foreign leaders as he travels through Asia over the next week, Obama said, he would be touting his administration's plans to create an economy that is driven more by U.S. exports and innovation.

Unemployment Rate Rises to 10.2%, Offering Little Reassurance to Job Seekers - NYTimes.com

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By PETER S. GOODMAN

The American unemployment rate surged to 10.2 percent in October, its highest level in 26 years, as the economy lost another 190,000 jobs, the Labor Department reported Friday.

The jump into the realm of double-digit joblessness — from 9.8 percent in September — provided a sobering reminder that, despite the apparent end of the Great Recession, economic expansion has yet to translate into jobs, leaving tens of millions of people still struggling.

“The guy on the street is going to ask, ‘What recovery?’ ” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The job market is still in reverse.”

The sharp rise in unemployment seemed certain to inject fresh tension into the debate over economic policy in Washington.

Republicans point to elevated joblessness as proof that the Obama administration’s $787 billion spending package aimed at stimulating the economy had failed. Labor unions and some Democrats are calling for another round of spending to create more jobs. And all of this comes against a backdrop of continued worries about swelling federal budget deficits.

In an interview this week, Richard L. Trumka, president of the nation’s largest labor union, the A.F.L.-C.I.O., called on the government to unleash fresh spending on large-scale construction projects to put people back to work.

Absent that, “it will probably be 2012 before there starts to be real job creation,” Mr. Trumka said.

Yet despite the headline-grabbing unemployment number in the government’s snapshot of the October job market, economists sifting through the details found several reasons to take comfort.

The pace at which jobs are disappearing continued to taper off in October, the precursor to eventual growth.

Between November 2008 and April 2009 — amid the paralyzing fear that accompanied the collapse of prominent financial institutions like Lehman Brothers — the economy shed an average of 645,000 jobs a month. Between May and July, the pace dropped to an average monthly loss of 357,000 jobs. And over the last three reports, average monthly job losses have slipped to 188,000, after factoring in upward revisions to the data for August and September.

The number of temporary workers increased by 44,000 in October, adding to gains in the previous two months — an apparent sign that businesses have squeezed as much production as they can out of their existing workforces and feel the need to bring in more people.

“That goes the right way,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “That’s an encouraging sign.”

The hope is that as the economy expands, companies will use fresh profits to add to payrolls as they reach for increased sales. As workers spend their paychecks, they will create opportunities for other businesses, generating more jobs.

Some experts see this scenario unfolding now, asserting that the economy will add jobs by late winter.

“People are hurting, but if you can get past the sticker shock of the unemployment rate and look at the guts of the report, they are still very consistent with a recovery,” said Michael T. Darda, chief economist at the research and trading firm MKM Partners. “We’re getting very close to the peak unemployment rate.”

But some doubt whether recent trends can continue, absent another dose of government spending.

Though the economy grew at a 3.5 percent annualized rate between July and September, much business activity was stirred up by special programs aimed at encouraging consumers to spend, not least the cash-for-clunkers program that provided taxpayer-financed cash incentives to people trading in their cars.

As the effects of this and other stimulus programs fade over coming months, fundamental weakness may reemerge, with consumers — whose spending accounts for 70 percent of overall economic activity — confronting enormous debt, the loss of wealth and fears about job security.

“We just went through an unbelievable financial catastrophe in this country and it typically takes a long time to come back,” said Joshua Shapiro, chief United States economist at MFR, a market research firm in New York, who envisions jobs continuing to decline until at least the middle of next year.

Beneath the dueling interpretations of future prospects, the report left little doubt that the present was still bleak in millions of American households.

In Columbia, S.C., Raymond Vaughn is still unemployed a year and a half after he lost his job installing and repairing windows. Back in April, he was training for a new career in medical billing, a growing field, through an online course he found on the Internet. But his unemployment benefits soon ran out, eliminating his $221-a-week check, and then he could no longer muster the $98 weekly payments for his course.

Mr. Vaughn, 43, is back to what has become a familiar if dreary everyday routine. He drives to the unemployment office downtown, where the crowds seem thicker than ever. He waits his turn to sit in front of a computer so he scan meager listings and send out fresh applications. Then, he returns home, to his sagging couch and his television, where cheerful news anchors tell him that the economy is looking up.

“They say it’s supposed to be better, that’s what I see on the news,” Mr. Vaughn said. “But I sure see a lot of people down at the unemployment office. I really don’t see how the job stuff is going to change. I don’t see any jobs out there.”

Last month, Mr. Vaughn thought he had a job, a position at a factory that makes flooring boards for $13 an hour. But two weeks before he was to go in for training, the company called him to revoke the offer.

“They said they had a hiring freeze,” he said.

And so Mr. Vaughn finds himself stuck in a crowded slice of a lean economy: another unemployed man living on the largess of a woman. His fiancée’s wages from her secretarial job pay the bills.

The latest job report amplified the reality that the pain has fallen particularly hard on men, who suffered a 10.7 percent unemployment rate in October, as compared to 8.1 percent among women. Among African American men, unemployment reached 17.1 percent in October.

Unemployment reached 9.5 percent among white Americans, 13.1 percent among Hispanics and 27.6 for teenagers.

Among all groups, the underemployment rate — a broader measure of the jobs shortfall which includes people whose hours have been cut, those working part-time for lack of full-time work, and those who have given up looking — is 17.5 percent.

Health care remained a rare bright spot, adding 29,000 jobs in October. For another month, construction and manufacturing led the declines, losing 62,000 and 61,000 jobs respectively.

Such were the details of a report dominated by a single fact: The official jobless rate now occupies two digits. More than a mere statistical marker, some worried that this could perpetuate anxiety, prompting a further hunkering down within the economy.

“It’s a benchmark,” said Mr. Baker. “It’s part of a general backdrop of economic news that does affect decisions by businesses and purchases of big ticket items.”

Javier C. Hernandez contributed reporting.

Generation Recession - Nation

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When David Thyme was an even younger man than he is today, his fantasies of early adulthood did not include a 9:30 pm curfew and a bed in Covenant House, a shelter for homeless youth. Then again, they also didn't include a recession so severe that his financially strapped father would ask him to help with rent--or that when he couldn't find an entry-level job to do so, his father would ask him to leave home. "He was like, Son, you got to do what you got to do. I can't have you in my house," recalled the thin-faced 18-year-old from the Bronx.

Shawn Bolden, an earnest 23-year-old from Harlem, also nursed a different vision of his youthful years. A graduate of Monroe College with a degree in criminal justice, he imagined dedicating his days to nurturing the minds of the next generation of neglected students, doing his part to solder shut the school-to-prison pipeline. But since losing his job teaching arts and college prep at a local nonprofit in June, he's been struggling to find his way back into the classroom, all the while worrying about feeding his newborn daughter.

And then there's Charles Channon. A 25-year-old graduate of George Washington University, he dreamed that his postcollege days would be devoted to an onward-and-upward career with an international development firm--or at least a job with which to pay off $65,000 in college debt. "I wouldn't pretend that there's absolutely no conceit in me, but I do want to get out there and make the best difference I can," he said.

So much for youthful fantasies.

These are not happy days for America's young and striving. Indeed, as the economy has rocked and tumbled its way through 2009, spewing jobs like a sea-sick tourist, these have become very, very bad days. In September, the unemployment rate for people between the ages of 16 and 24 hovered morosely at 18.1 percent, nearly double the national average for that month. At the same time, the actual employment rate for 16- to 24-year-olds dropped to a startling 46 percent, the grimmest such figure on record since 1948, the year the government began keeping track. Taken together, this same group of young people has lost more than 2.5 million jobs since the economy began deflating in December 2007, roughly one-third of all the jobs lost, making them the hardest-hit age group of the recession.

And it gets bleaker. Bad as the youth unemployment numbers are, the underemployment numbers are even more distressing, with young people once again taking the hit. During the second quarter of 2009, for instance, the underemployment rate for workers under 25 was an alarming 31.9 percent; for workers between 25 and 34 the underemployment rate was 17.1 percent.

All of which suggests that for all this country's unbridled fascination with the glories of youth; for all the teen-lusting TV dramas, wunderkind "it" kids and peewee tech moguls, to say nothing of all the industries built on making the rest of us look and feel teen-queen young--being a member of today's youth explosion isn't a particularly enviable position after all.

"Young people under 30 have been far more affected than other groups in the economy during the recession," says Andrew Sum, professor of economics and director of the Center for Labor Market Studies at Northeastern University. "And the younger you are, the worse off you've been."

The reasons for this are multiple and complex, but perhaps the one that young people cite most is their desperate new job competition: adults twice their age with college degrees and decades of experience are now applying for entry-level positions. Moreover, those young people lucky enough to have found work often fall prey to the old "last hired, first fired" syndrome, putting them right back where they started. The result is that young people are not only working less than at any time since the Great Depression but could suffer the consequences deep into their individual and collective futures.

"These effects are long-lasting; they're not short and measly-lasting," explains Sum, citing several studies suggesting that a slow employment start can have long-term consequences. In the case of white male college graduates, for instance, an influential study showed that for as long as fifteen years after college, those who graduated into the recession-rocked economy of the early 1980s earned less than those who graduated into a sunny employment market. Equally disturbing: those who work only part time when younger, as so many young people must now do, see little benefit to their future wages compared with those working full time.

"We are throwing out of the labor market those kids who will benefit the most from the work experience they get, and they will lose that for the rest of their lives," Sum warns. "That's why it really is a depression for young workers. And I don't use that word lightly."

This was not the graduation party that most young folks imagined when they daydreamed about their liberation into early adulthood. It's certainly not the champagne-and-streamers rager that millennial boosters and other youth gurus anticipated when they dashed off all those messianic star charts predicting that this new wave of young folks would usher in the next epoch of dreamers and do-gooder types: the next Great Generation.

And yet, bleak as the current climate is, the story behind the statistics is also far more complicated--and, in some ways, uglier--than many of the recent apocalyptic pronouncements about a "lost generation" and "dead end kids" would suggest (see BusinessWeek's October 19 cover story and the September 27 New York Post, if you dare). Certainly there are scads of lost young souls roaming the aisles of job fairs, cluttering unemployment offices and weighing whether it's more important to pay the electricity or the phone bill. But in this generation of 80-odd million, some people are far more lost than others, while some have the luxury of not being lost at all. Quite simply, the real danger of the recession is not necessarily a lost generation of unemployed millennials so much as a Swiss cheese generation where the places once occupied by the least affluent--particularly the least affluent people of color--have simply been carved out.

"I hope people are really clear that this is not an equal-opportunity recession, that it's hurting the weakest," says Dedrick Muhammad, senior organizer and research associate for the Institute for Policy Studies Program on Inequality and the Common Good, who has done extensive research on the recession's disparate, and decidedly racial, impact on the people of this country.

Once again, the data help tell the story. As reported by the Bureau of Labor Statistics in early October, young African-American teens between the ages of 16 and 19 have an unemployment rate of 40.7 percent, while young Latinos of the same age are unemployed at a rate of nearly 30 percent--both drastically higher than the 23 percent unemployment experienced by their white peers. Among 20- to 24-year-olds, the disparity is even more dramatic: while young white workers in their early 20s have an unemployment rate of 13.1 percent, their African-American compatriots are unemployed at the rate of 27.1 percent, more than twice as high.

Or as Sum summarizes, "If you are both low-income and black or low-income and Hispanic, you have lost the most. And if you are young, affluent and a woman, in terms of just labor market studies, you've done OK... although across the board everybody has lost."

These losses have stacked up quickly, but today's great youth crisis didn't happen overnight, the sudden result of an immaculate recession. For young workers--and in particular young, low-income and workers of color--the struggle began long ago, with the changes that began refashioning the economy as far back as the 1980s: the decline of unions; the long, slow death of manufacturing; the rise of the service economy; and the near-total disappearance of proactive government policy. The last decade in particular, with its post-dot-com recession followed by a jobless youth recovery, has been particularly bruising.

The result of all this has been that many of today's young people--again, especially the poor, those with less education and people of color--have a measurably harder road to travel than their generational elders, according to "The Economic State of Young America," a report published in spring 2008 by Demos, a New York-based research and advocacy organization. Between 1975 and 2005, for instance, the typical annual income for workers between the ages of 25 and 34 decreased across all educational brackets, with the exception of women with bachelor's degrees. Men without a high school diploma suffered most, their annual income plummeting by 34.2 percent, while men with a high school diploma or the equivalent earned the runner-up slot, with an income drop of 28.5 percent. As for women, those with less than a high school diploma, as well as those possessing just a diploma, lost less ground than their male counterparts; but then again, they're still doing worse than before and, perhaps more to the point, they still fare significantly worse than men their age.

At the same time, today's young workers have had to do more with less. College tuition rates have skyrocketed--in fact, rates for four-year public universities have more than doubled since 1980--with the unsurprising result that nearly two-thirds of students graduating from four-year colleges in 2008 left in debt. The cost of childcare now eats up as much as 10 percent of a two-parent family's income in many states (as much as 14.3 percent in Oregon). And young people between the ages of 19 and 34 are the most likely population to be uninsured--not because they don't want health benefits but because employers don't offer them. A case in point: 63.3 percent of recent high school graduates had employer-provided healthcare in 1979, whereas just 33.7 percent had it in 2004.

"What we're looking at is a situation where young people entered the recession already feeling the brunt of thirty years' worth of pretty gradual but nonetheless dramatic economic and social changes," says Nancy Cauthen, director of the Economic Opportunity Program at Demos. "The recession just made a bad situation worse."

Thankfully, there's something of a pewter lining surrounding all this bleakness: not only are certain swaths of this generation among the most politically engaged in decades but the generation's politics in general trend decidedly toward the progressive. Indeed, many young people have already begun coming together, in protest and coalition-style advocacy, to push for everything from green jobs to increased bank regulation to state budgets that aren't balanced on students' backs (thank you, University of California protesters!).

This is promising, since the list of much-needed solutions to young people's recession problems is long and daunting--beginning, many researchers agree, with the need to create more jobs: green jobs, Job Corps jobs, public works jobs, even tax credit-induced jobs. However, these can't be just any old jobs; they must be jobs targeted toward young people, jobs for which employers are induced to hire the youthful, inexperienced and most vulnerable, because, as Sum says, "Very few kids are being hired by the stimulus." His solution: pull them into the workforce either through direct job creation, partial subsidies or targeted tax credits to youth-hiring businesses. Moreover, he advises, these jobs also must last longer than a brief six- to twelve-week summer fling. That's how long the roughly 284,000 summer youth jobs funded by the stimulus lasted, even though there is almost no evidence that a quickie summer job has any lingering effect on a young person's long-term prospects--though there is evidence that summer jobs that extend into longer-term employment help quite a bit, according to Sum.

But above all, these new jobs have to be far more plentiful and ambitious in scope than the ones created thus far, not the least because it will take years for the country to crawl out of the vast employment hole, roughly 10.7 million jobs deep, created by this recession. And while 284,000 summer youth jobs certainly represent an important start, they not only don't meet the current need but seem downright piddling compared with the nearly 1 million government-sponsored summer youth jobs that existed during the late 1970s.

"This is classic of Obama's situation: Obama can double something or increase it 100 percent from the previous administration, but it's still so insignificant to the problem," explains Dedrick Muhammad. By contrast, he observes, "Wall Street's booming because the government took seriously their problems and did a massive intervention."

Of course, even if a slew of youth jobs materialized overnight, it would only be the beginning, since, as Cauthen cautions, "the recession could end tomorrow and that's not necessarily going to mean a bright future for young people." For that, she and others have argued, this generation needs more systemic, probing change, including easier access to the protection of unions in the form of the Employee Free Choice Act, more affordable health insurance in the form of universal health coverage, childcare that doesn't decimate their paychecks. And that's just for starters. With these policies in place, the rising generation still has a chance at the starry future that's been predicted for it. Without them, well, just imagine the way things are now--and then extrapolate.

Two recent events in New York City illustrate the way the world is trending for two very different groups of young people--the young and bailed-out versus the young and bailed-on. The first took place amid the brick-and-ivy greenery of Columbia University, in the world of the bailed-out. It was mid-September, and several hundred college students had packed into the school's Faculty House for an intimate evening with a team of Goldman Sachs recruiters. A year earlier, these recruiters probably seemed like a dying species, a herd of expensively dressed mastodons taking their valedictory spin, while the sober-suited students must have looked almost pitiable. But on this evening, the recruiters looked very much alive--downright brash--as they wooed the standing-room-only crowd of eager if anxious-looking students. Clutching brochures that urged them to "make the most of your talent," these students listened in unblinking awe as the recruiters spoke of their bank's "competitive advantage," its "global impact," the golden "opportunity" that awaited all Goldman employees, old and young.

And in case the students missed the point, there was a promotional video, starring a comely squad of young analysts (all programmed, it seemed, to repeat the word "unique!"), that ended with the cultish mantra, "I believe, I believe, I believe in Goldman Sachs." It was as if it were 2006, not 2009, as if the good old days of overpaid young analysts with Town Cars and expense accounts were back again--which, thanks to the government, they essentially are.

"If you do well and you're ambitious, you really can do well," a handsome young trader of mortgage-backed securities promised a throng of students who'd gathered around him for advice.

Meanwile, several weeks earlier, in a part of town not touched by bank bailouts, a very different scene played itself out in a Covenant House conference room. There, nine homeless New Yorkers between the ages of 18 and 20--among them, David Thyme--huddled around a table topped with pizza and soda and shared their failed attempts at finding a job. All of them wanted one, but none had managed to find one despite months of scratching at the closed doors of just about every fast-food, retail and service joint in town. According to Jerome Kilbane, Covenant House New York's executive director, the organization's job training program has placed 40 percent fewer young people over the past year.

"It's kind of discouraging when you go out and you come back empty-handed every day," said Samantha, a serious-faced 19-year-old who dreams of becoming a physical therapist someday but is currently so strapped for cash she can barely afford a MetroCard to look for a job.

"I feel if I had a job I wouldn't be here," added Leonda, who is charismatic, chatty and also 19. "Not to say that this is a horrible place, but I'd be able to stand on my own two feet and live as an adult and be me."

Samantha and Leonda, who are part of a wave of homeless young folks that has swollen the ranks of Covenant House's residents by 25 percent, expressed deep anxiety about their future. But they also knew their worth. When asked what they wanted to tell the people in power, Samantha didn't hesitate.

"I say, We are your future. If we don't make it now, then who's going to take care of you when y'all is in y'all retirement phase?" she asked. "If we don't make it out of this, then basically the whole world don't make it out of this."

For Twins in New York, a Long Struggle in a Tough Job Market - NYTimes.com

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By N. R. KLEINFIELD

SEVENTEEN months out of Rutgers University, they live in an unwelcome continuum of mass rejection. Between them, Kristy and Katie Barry, identical twins who grew up in Ohio, have applied for some 150 jobs: a magazine for diabetics, a Web site about board games and a commercial for green tea-flavored gum; fact-checking at Scholastic Books, copy editing for the celebrity baby section of People.com, road-tripping for College Sports Television.

They did not get any of these. More than a year has lapsed without so much as an interview. Apparently, even a canned response was impossible in New York.

“I wake up hopeful and check my e-mail and then all there is is the Merriam-Webster word of the day,” Katie lamented. “Or a stupid Facebook thing. So-and-so sent you a puppy. Or a drink. Great!”

Kristy recently friended an editor on Facebook, thinking that was the ticket. Zip. She talked up a guy on the subway, found out he worked at a radio station, dispatched a résumé. Zip.

They play softball, asking teammates what they are up to, sifting for leads. They took an improv class, something that might lead to something that actually led to nothing.

To imprint themselves on potential employers’ minds, they send Buckeyes, a chocolate-coated peanut-butter confection that is an Ohio specialty they make to perfection. “I’m going to send some out today,” Kristy said the other morning.

Eyes crusted with sleep, Katie rummaged through Craigslist, journalismjobs.com, Whisper Jobs. She fastened on a notice for an editorial assistant at Cure magazine, aimed at cancer patients.

A résumé entered cyberspace. “I’ve sent out something,” she noted. “I’m not wishing on milkweed seeds.”

Kristy: “I’m so tired of coming up with cover letters that I think are interesting, and then nothing.”

Katie: “You think, O.K., do I kick somebody’s door in?”

Kristy: “My computer is burning up. It’s saying, ‘I’ve uploaded your résumé so many times, I’m exhausted.’ ”

Good kids who went to good schools, the brassy, effervescent Barry twins, 24, always envisioned their young adulthood in New York City as a lush time of stimulating work, picturesque travel and a rich social orbit. But they graduated into a downbeat nightmare of a job market. According to an analysis of government data by the Economic Policy Institute, the unemployment rate for college graduates under 27 so far this year averaged 7.1 percent, nearly double what it was in 2007 and the highest yearly average in the 30 years this data point has been tracked.

And so Kristy and Katie and most of their friends are forever hunting for jobs, both mundane interim work to sustain them and long-term positions that could mean a career. Many days, it is as if they are stalking something on the endangered species list.

•

They were born in Columbus, Ohio, the middle of six siblings. Their parents divorced when they were 15, and they don’t stay in touch with their father but are close to their mother. She is remarried and lives in Weehawken, N.J., selling items for estates and art dealers and doing freelance writing.

The twins began at Marietta College in Ohio, then transferred as juniors to Rutgers’s campus in Newark. They graduated in May 2008 with journalism degrees, internships under their belt and student loans totaling $39,000 apiece.

Their dream is to work together in sports reporting or have a TV show, but they are flexible. They talk of teaching piano, or inventing, say, a lipstick-case microphone. “If you’re in a bar you would hold it up and say, ‘This guy is creepy, get out of here,’ ” Kristy explained.

She works as a bartender, three nights a week, at Dive 75 on West 75th Street, making about $800 a week. Katie had been working at another bar, but was fired in June after landing in Cancun to begin a vacation. Her boss said she played the music too loud.

This summer, the twins moved from Newark into a cozy two-bedroom fourth-floor walk-up on West 73rd Street, $2,900 a month. They share it with their brother Zack, 22, a junior at Parsons the New School for Design. Occupying the living room couch is Zack’s classmate, Rostislav Roznoshchik, who works part time at the Blue Donkey Bar. He wants to be a public artist.

Growing up, they mowed lawns, shoveled snow, fetched mail for the elderly. And, of course, there was the squirrel lady, who could not countenance roadkill not receiving respectful burials. She gave the twins $5 an animal to shovel corpses off the streets and bring them to her. Money is money.

Those weren’t perfect jobs, and the last one they had in Ohio was what convinced them it was time to head East. They worked as clerks at the Dancing Donkey, a crafts store with a donkey out back named Donk for kids to feed. Business leaned toward slow. The twins invented games to endure the tedium, like who could stay the longest in her chair without moving.

Now, jobless, days going by one at a time, Katie found herself saying things like: “It’s driving me bonkers. Like what has my existence come to?” And: “I’m going to stab myself.”

She showed her nails: nibbled beyond existence. “I’ve been like a woodchuck,” she said. “My hands hurt.”

Kristy held up hers: gone.

•

The dogs today. To pick up spare money, Katie fills in for a dog walker when he’s away, which is not that often.

It’s not nanotechnology, but you do need to know technique. The first dog, Cassie, for instance, does not like to budge. The trick passed on from the owner was to drop a box of tissues on the dog’s hindquarters.

Sure enough: tissues dropped, dog out the door.

Dogs were fine, but the work got Katie’s thoughts going the wrong way. There’s a guy she sees around the neighborhood who wears plastic bags for shoes. When she’s walking dogs she begins to worry that that is going to be her, without work, stumbling along in plastic bags.

Of course the twins have no health insurance. Not long ago, Katie had a bad earache — felt like a screwdriver pushing into her ear — that she self-medicated with tea and over-the-counter pills. Kristy has been sensing pain on the right side of her jaw. It hurts when she eats something hard or yawns widely.

What they do have is friends, and they support one another. A guy who manages a tomato-canning plant gives them canned tomatoes, olive oil and coconut milk. An accountant ex-boyfriend of Kristy’s does their taxes. He also sends gifts, like a CD to learn Russian, although Kristy has never expressed even tepid interest in learning Russian. They, in turn, rake the leaves at his New Jersey home and wash his car.

Another friend works as a waiter at an Italian restaurant while he tries to locate voiceover work. The twins drop in with a big group, then he’ll round up people to run up a tab at Kristy’s bar.

One night at Prohibition, a bar on Columbus Avenue near 84th Street, they slid into outdoor tables with a dozen comrades. Their brother Zack told how he and a friend had been handing out homemade cards to strangers to lift their spirits. One says on the outside, “I would be lying if I said ...” And then inside it says, “That you aren’t gorgeous, because you are. Please pass this on to someone you feel is gorgeous.”

One member of the group was in law school, another training for a career in ophthalmology. Others were doing things like sleeping in a museum as part of an exhibition, selling at Bloomingdale’s, bartending.

A guy hoping to start an online business was taking a $600 aptitude test to tell him what he’s good at.

•

Mom came in for lunch, at a Chipotle on 42nd Street. They began by joining hands and saying what they were thankful for, then Mom said, “Tell me something new.”

Katie mentioned a baby-sitting job: two days.

They had gotten some good buys at a thrift shop: a coin belt for $3, an “Animal House” DVD for $2, an X-Men tennis racket for $3.27.

The twins love Mom, whose name is Tyna Walker-Lay, but she can get to them at times. Like when she says she can’t tell the relatives back home they’re bartenders. She says that just about every time they talk.

Katie said: “Relatives in Ohio think working in a bar is a step down from prostitution.”

Katie said to Mom: “You know, you once thought we should be schoolteachers and have the summers off.”

Mom: “That’s still a thought down the road.”

Mom points out, with regularity, that they need jobs with benefits. She has noted that a prison guard gets benefits.

Grandma e-mails from Columbus, telling the twins she prays for them. Or that Ohio has openings for office clerks. A few months ago, when Katie wrote that she had split up with a boyfriend, Grandma came back with: “Are you girls ever going to get married?”

Mom had to run: “Some of us have to be productive, have benefits, 401(k)’s.”

She told them she loved them.

•

They claimed a couch upstairs at the Aroma Espresso Bar on West 72nd Street, where they like to ingest caffeine and comb the Web: Think, think, think.

The other day, a brainstorm hit. They would devise a blog called Twin Town, write about their lives and invite guest material, somehow woo advertisers.

Kristy said she could do a photo display with the gnome bank that she had lugged around Newark, snapping pictures of it at the park, at a beauty store, in a police car.

Katie said she could list idiotic reasons people give for breakups. Kristy liked that one, mentioned the guy who ditched her because he said her jokes weren’t funny. Katie brought up the friend whose boyfriend left after telling her she slammed his car door too hard.

“Excellent,” Kristy said.

•

Happy Hour at Dive 75, Kristy at the bar. Familiar faces trickled in, spat out orders. Here was Ren Quiroz, the friend who manages the canning plant. Another friend, involved in pharmaceutical pricing, showed his new tattoo. Their roommate, Rostislav, arrived. He said he earned $4 at the Blue Donkey today. Katie showed up for a beer.

Kristy worked the crowd, playing Hot Dice and Connect Four. She doesn’t mind bartending, but it’s no career, not for her. As she put it: “Bartending is like dating a guy you know you’re not going to marry.”

And: “I keep wondering how do I propel myself out of the bar world, where I look cute and pour beer, into a world where I have thoughtful conversation about the world rather than stuff like why do people clap at the end of good movies. Or, why do you think Heidi Klum married Seal? I don’t care why!”

Katie was moping a bit, saying, “I’ve eaten so many canned beans lately.”

And: “I need a life coach to come in and tell me what I’m doing wrong. I keep singing that song, ‘Something’s Got to Give.’ ”

•

The wind picked up. They got drinks from Starbucks and sat in the park on Columbus and 66th Street, the acceleration of life around them.

Katie said that a friend put her on a list to get into focus groups: “They pay you to say if you like green ketchup or hate Lysol. I can do that.”

Kristy said the bar had been so slow one night that she found herself singing Celine Dion to the fish tank: “There’s got to be a way out of this,” she said.

They had been chewing over ways to get noticed, inject some news into their lives. Mom always told them: “If you continue to do what you’ve always done, you’ll always be what you’ve always been.”

Kristy suggested hiring a helicopter to scatter her résumé over Manhattan.

They had a saxophone, so Katie thought of playing in the subway with a sign inviting job offers. “I could have Mom sing,” she said.

She dug out her phone and called Mom. Mom did not embrace the idea, mentioning how mortified she would be, saying she would have to wear a hat and dark glasses.

They looked up to find Michael Moore shambling past with a small entourage. They caught up to him, told him they admired him and were looking for jobs and wondered when he knew what he wanted to do. He told them how he was unemployed, collecting $98 a week, saw the General Motors chairman on TV, and on and on.

And: “I realized when bad things happen it’s really just the window to the next good thing happening. That’s not too hippy-dippy a thing to say, but that’s what I found.”

Kristy said, “Yeah, I know what you mean.”

And Michael Moore said, “On the other hand, when things are going really well, it’s like, when’s the next shoe going to drop.”

He laughed. They laughed.

He said, “Thank you very much and good luck.”

•

Katie launched into “Nowhere Man,” then “In My Life,” the sax’s mournful wail ringing through the tunnels in the Times Square subway station on a Friday afternoon. Her sign read: “Don’t Give Money, Give Business Cards.”

Kristy had come along, lugging the milk cases that served as a music stand. It was their luck that a seven-piece band roared away on a nearby platform.

Some people took pictures. Most did nothing. A few cards fluttered into Katie’s case: a music combo, a realtor, a music editing firm, a comic book store, a placement agency and a dentist in Kentucky. Plus 54 cents.

They had had a meeting with Deadspin, a sports blog, but no real jobs there, just the suggestion to join an Australian football team and write about it. Katie was pursuing an internship at the United Nations. Kristy decided to try to interest New York magazine in an article about the effect on kids who appear in unflattering YouTube videos. From a posting on Monster.com, she heard from someone who wondered if she could translate Arabic.

“That was like the world laughing at me,” she said.

And so it went, and so it went. Jobs were out there somewhere. Something had to give.

WSJ.com Economic Forecasting Survey Shows Road to Recovery - WSJ.com

Image by Vlastula via Flickr

By PHIL IZZO

The worst recession since the Great Depression has left a scorched landscape that will weigh on the labor market and the broader economy for years to come, according to economists in the latest Wall Street Journal forecasting survey.

The 48 surveyed economists expect the economy to bounce back from four quarters of contraction with 3.1% growth in gross domestic product at a seasonally adjusted annual rate in the just-ended third quarter.

Charts and Full Results

• See forecasts for growth, unemployment, housing and more. Plus, views on the auto industry, ranking Fed chairmen, grading policymakers and more. Survey conducted Oct. 2-6. (Or download all data as .xls)
• Econ: Can the Consumer Recover?
• Econ: Gap Between Available-Desired Job Skills
• Complete Coverage: Forecasting Survey

Expansion is seen continuing through the first half of 2010, though at a slower rate. But the massive downturn means the labor market will take years to heal. On average, the economists don't expect unemployment to fall below 6% until 2013; unemployment hit 9.8% in September.

"Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance," said Allen Sinai at Decision Economics.

The labor market's tough road was underscored by Thursday's report on weekly applications for unemployment insurance. The Labor Department reported that initial claims fell 33,000 to 521,000 in the week ended Oct. 3. The number of people collecting unemployment insurance also fell, but remained above six million.

About the Survey

The Wall Street Journal surveys a group of 52 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted every month. Once a year, economists are ranked on how well their forecasts have fared. For prior installments of the surveys, see: WSJ.com/Economist .

The decrease in continuing claims likely reflects people exhausting their unemployment benefits after several months of looking for work in vain.

"We expect the improvement to remain a very slow one, and therefore for the household sector to be contending with a weak labor market for quite some time," Joshua Shapiro, chief U.S. economist with research firm MFR Inc., wrote in a note to clients.

On average the economists -- not all of whom answered every question -- expect the unemployment rate to peak at 10.2% in February. But even once the employment situation stops getting worse, economists expect recovery to come slowly. "It could take until 2014-15 before we see a 5% handle on unemployment again," said Diane Swonk at Mesirow Financial. Persistently high unemployment could prove a political hot potato not only for the 2010 midterm elections for Congress but also for the 2012 presidential election.

Bloomberg News

A job seeker fills out an application last week in Raleigh, N.C. Economists expect the unemployment rate to keep rising.

Senate Democrats on Thursday said they reached a deal to extend unemployment-insurance benefits to the nearly 2 million jobless workers in danger of running out of assistance by year's end. The agreement would give an additional 14 weeks of benefits to jobless workers in all 50 states. Workers in states with an unemployment rate at 8.5% or above would receive six weeks on top of that.

Democrats said they could try to bring the measure to a quick vote on the Senate floor Thursday evening, depending on whether Republicans demand more extended debate.

While nine of the 46 economists who answered a question on the subject supported tax cuts for employers and seven backed tax incentives for hiring, nearly a third said the government shouldn't do anything. Just four said the government should boost spending.

"It's time to let the business cycle take over," said Stephen Stanley of RBS.

The existing $787 billion stimulus has raised concerns about the deficit, with almost three-quarters of respondents saying taxes will have to be raised on those making less than $250,000 at some point in the next six years.

Meanwhile, the Federal Reserve has to decide when and how to pull back from its interventions in the market and when to raise interest rates from their current level of 0% to 0.25%. The economists don't expect the central bank to raise rates at all until sometime around August 2010 amid continued high unemployment.

Some economists worry the economy will turn down again over the next 12 months, leading to a so-called double-dip recession.

—Conor Dougherty contributed to this article.

Write to Phil Izzo at philip.izzo@wsj.com

America Out of Work: Is Double-Digit Unemployment Here to Stay? - Time

Image by Getty Images via Daylife

By Joshua Cooper Ramo

It was not a lesson Lawrence Summers mastered with great ease. But after nearly a decade working beside sphinxlike Alan Greenspan, and having watched his own tenure as president of Harvard cut short by a phrase that slipped too nimbly from brain to mouth, Summers, director of the President's National Economic Council, has become a restrained public man. Gone are the days when he would glibly compare flailing financial markets to jet crashes, as he did to TIME in 1999. He is mindful of how ill-considered asides by policymakers can cause financial-market angina. So you can probably imagine the ripple that ran through the Peterson Institute for International Economics in Washington in July when Summers looked up from his prepared speech, flashed a grin and loosed the sort of utterance that once upon a time marked imminent indiscretion. "There was," he told the room, "a fight about whether I was allowed to say this now that I work in the White House." (See how Americans are spending now.)

What Summers proceeded to offer was, in fact, an unusually candid insight. And though couched in jargon, it was an insider's confession of why our present economic moment is fraught with both danger and opportunity. There appears to be, Summers told the suddenly very attentive crowd, a strange bit of physics working itself out in our economy. The problem is related to a hiccup in an economic rule called Okun's law. First mooted by economist Arthur Okun in 1962, the law (it's really more of a rule of thumb) says that when the economy grows, it produces jobs at a predictable rate, and when it shrinks, it sheds them at a similarly regular pace. It's a labor version of how the accelerator on your car works: add gas, go faster; less gas, go slower.

What made Summers' frank comment important is that it suggests this just-add-gas relationship may now be malfunctioning. The American economy has been shedding jobs much, much faster than Okun's law predicts. According to that rough rule, we should be at about 8.5% unemployment today, not slipping toward 10%. Something new and possibly strange seems to be happening in this recession. Something unpredicted by the experts. "I don't think," Summers told the Peterson Institute crowd — deviating again from his text — "that anyone fully understands this phenomenon." And that raises some worrying questions. Will creating jobs be that much slower too? Will double-digit unemployment persist even after we emerge from this recession? Has the idea of full employment rather suddenly become antiquated? Is there something fundamentally broken in the heart of our economy? And if so, how can we fix it?

See which businesses are bucking the recession.

Read "How to Know When the Economy Is Turning Up."

The Labor Conundrum
The speed of America's now historic employment contraction reflects how puzzling this economic slide has been. Recall that the crisis has included assurances from the chairman of the Federal Reserve that it was over when in fact it was just getting started and a confession from a former Fed chairman that much of what he thought was true for decades now appears to be wrong. Nowhere is this bafflement clearer than in the area of employment. (See 10 things to buy during the recession.)

When compiling the "worst case" for stress-testing American banks last winter, policymakers figured the most chilling scenario for unemployment in 2009 was 8.9% — a figure we breezed past in May. From December 2007 to August 2009, the economy jettisoned nearly 7 million jobs, according to the Bureau of Labor Statistics. That's a 5% decrease in the total number of jobs, a drop that hasn't occurred since the end of World War II. The number of long-term unemployed, people who have been out of work for more than 27 weeks, was the highest since the BLS began recording the number in 1948. Jobless figures released Sept. 4 showed a 9.7% unemployment rate, pushing the U.S. — unthinkably — ahead of Europe, with 9.5%.

America now faces the direst employment landscape since the Depression. It's troubling not simply for its sheer scale but also because the labor market, shaped by globalization and technology and financial meltdown, may be fundamentally different from anything we've seen before. And if the result is that we're stuck with persistent 9%-to-11% unemployment for a while — a range whose mathematical congruence with that other 9/11 is impossible to miss — we may be looking at a problem that will define the first term of Barack Obama's presidency the way the original 9/11 defined George W. Bush's. Like that 9/11, this one demands a careful refiguring of some of the most basic tenets of national policy. And just as the shock of Sept. 11 prompted long-overdue (and still not cemented) reforms in intelligence and defense, the jobs crisis will force us to examine a climate that has been deteriorating for years. The total number of nonfarm jobs in the U.S. economy is about the same now — roughly 131 million — as it was in 1999. And the Federal Reserve is predicting moderate growth at best. That means more than a decade without real employment expansion.

We're a long way from Hoovervilles, of course. But it's not hard to imagine, if we're not careful, a country sprouting listless Obamavilles: idled workers minivanning aimlessly through overleveraged cul-de-sacs with no way to pay their mortgages, no health care, little hope of meaningful work and only the hot comfort of angry politics.

This is why the problem of how America works needs to become the focus of an urgent national debate. The jobs crisis offers an opportunity to think in profound ways about how and why we work, about what makes employment satisfying, about the jobs Americans can and should do best. But the ideas Washington has delivered so far are insufficient. They reflect a pre–9%-11% way of thinking as much as old defense policy reflected a pre-9/11 notion of who our enemies were. The funding for job creation in the American Recovery and Reinvestment Act was based on an assumed 8.9% unemployment rate. Now 15% is a realistic possibility. And yet we're hearing few interesting ideas about how to enhance America's already groaning unemployment support system as millions of Americans sit idle. Tangled in the debate over health care — and bleeding political capital — the White House may find itself too weak and distracted to deal with the danger of joblessness.

We can't afford to wait. The longer someone is unemployed, the harder it is to get back to work, a fact as true for the nation as it is for you and me. As the Peterson Institute's Jacob Kirkegaard explains, "It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem." Past crises have illustrated that lesson: the longer you wait, the harder it is to contain. This is as true for joblessness as it was for subprime mortgages, al-Qaeda and computer viruses.

Watch TIME's video of Peter Schiff trash-talking the markets.

See 10 ways your job will change.

Right Man, Right Time
By one of those strange Sully Sullenberger collisions of preparation and crisis — the sort that put Depression expert Ben Bernanke in at the Fed at the moment of a flameout of 1930s magnitude — Larry Summers made his reputation as an employment theorist. Summers is the nephew of two Nobel economists and was regarded as the smartest undergrad anyone knew, but as he surveyed his research options 30 years ago, he settled on the then relatively unsexy specialty of labor. The subject tickled his sense of skepticism. "The view that was taking hold at that time, a view that unemployment wasn't a terribly serious problem, was importantly wrong," Summers says. "I thought if you could have areas where there was long-term substantial unemployment, then that raised some questions about the functioning of markets." In essence, Summers saw in unemployment a chance to explore how markets don't work — and to think about policies that could correct for the failures. Perfect training for 2009.

Many of the ideas Summers developed were codified in a 1986 article titled "Hysteresis and the European Unemployment Problem." Even today it's a piece he's proud of: "Ah, yeah, the hysteresis article," he interjects when it's mentioned. Hysteresis is a word that you (and the rest of us) should hope we don't hear too much of in the coming months. It comes from the Greek husteros, which means late. It refers to what happens when something snaps in such a way that it can never be put back together. Bend a plastic ruler too far, drop that lightbulb — that cracking sound you hear is the marker of hysteresis. There's no way to restore what has just been smashed. (See the top 10 bankruptcies.)

The idea that hysteresis happens to economies is one that economists don't like to think about. They prefer to consider economies as yo-yos tethered to the sturdy string of the business cycle, moving up and down from growth to slowdown and back. But from time to time, things do snap. And Summers' argument in 1986 was that unemployment in Europe, the sort that might persist in the face of growth, was an expression of an economy that had snapped. Europe's economy was hit not only by shocks like an oil-price spike, a productivity collapse and rocketing tax rates but also by stubborn unions that made hiring, firing and adjusting payrolls near impossible.

Hysteresis, Summers explained, could come from all sorts of shocks like this. And that may be what is playing out in the U.S. If you look at the three great job busts of the past 100 years — the 1930s, the early 1980s and today — you find an important difference. The Reagan recession ended with workers returning to jobs that were the same as or similar to the ones they had lost. But 1930s joblessness was structural. The jobs people lost — largely in agriculture — never came back. Workers had to move to the industrial sector, a transition helped by the demands of a war. It was massive national hysteresis. Sound familiar? "A lot of the jobs that have been lost will never come back," the Peterson Institute's Kirkegaard says. Which means that hiccup in Okun's law is a warning: growth alone won't employ America again.

See pictures of the stock market crash of 1929.

See pictures of the recession of 1958.

Cash for Clunker Careers
What to do? If your goal is to create jobs, you have two choices — and one painful fact — to confront. The painful fact is that the 1930s option, to have the government directly employ millions of people in labor fronts, is not an option today. "There's no way to create real jobs using this approach," says Harvard professor Roberto Mangabeira Unger. In the 1930s, you could throw 10,000 people with shovels at dam or road projects. Today the work of 10,000 shovels is done by a few machines — and it was a lot easier to persuade farmers to switch to ditchdigging than it would be to get laid-off hedge-fund traders to switch to sewer repair, appealing as such an idea might be. (See pictures of the global financial crisis.)

So if the government can't hire everyone, where will jobs come from? One option would be to rely on traditional strategies: if we create demand through growth, cheap money and massive government spending, then some jobs will return. In the meantime, train people for whatever work they can get — fast food, nursing, you name it. But if we're in a posthysteresis world, then just adding gas to the economy won't be enough, and making cheap low-end jobs won't deliver a workforce capable of sustaining competitive growth. "There's no use making economic change if you don't have human agents who can take advantage of it," Unger explains.

The alternative would involve reshaping what it means to work in America. Such a plan would start by changing what it means to be jobless. To begin with, this would require a massive increase in job retraining, one that assured that every laid-off worker had a chance to learn a new skill and years of funding to master it — instead of the six-month shots now generally offered. The Administration's proposal to increase funding to community colleges is a start. But it's only a start. Ideally, the White House needs to propose an omnibus employment-emergency bill that guarantees jobless workers a basic set of rights for two to three years: health care, access to retraining, subsidized mentoring for careers in high-end manufacturing or health services. Handled well, such a program could be a "cash for clunker careers." Obama should also bring together innovative minds in technology and service — the people who run consumer-driven businesses like Disney and Google — to find ways to make the process of being unemployed less of a bureaucratic and emotional mess.

But we've also got to take a careful look at how jobs are created — and what sorts of jobs Americans want to do. The most likely sources of job growth in the next few years are going to be confined to health care, education and restaurant/hospitality services. But we can't nurse, teach and barista our way to real national power. Service jobs alone can't support growth and innovation — which will be essential as we struggle to pay off a historic national debt and fund the retirement of the baby boomers. So in addition to a retraining push, a sensible set of policies would shift the landscape of job creation. It would transfer money out of Wall Street and into community lending to encourage the formation of new companies. It would create local business pods in which neighbors ask, What do we do well here, and how can we do it better? Some of the world's most skilled machinists live in the American Midwest. But their skills are geared to a dying auto industry, and with no bank credit for start-ups and no way to organize, they have no chance to transform themselves into a workforce for globally competitive precision-manufacturing firms.

Is there really a demand for machinists? Yes — even in a recession. One rough calculation found that about a million high-skilled jobs remain unfilled. This is why a fresh approach to job-making, one that focuses on mastery of skills instead of simple button-pushing, matters. "If we go back to the old ways," says sociologist Richard Sennett, who has probably studied the quality of American working life as thoroughly as any other scholar in the past few decades, "we just go back to a very unsustainable path."

The President's advisers grasp the urgency of the task. "Would I like Americans to be more skilled?" Summers muses. "Yes. Would I like to be able to increase skill faster than is likely to be possible? Sure. Would I like a larger fraction of good entrepreneurial ideas to happen in the U.S.? Of course. There are millions of people who need work." But Summers need only read his own research to recall that traditional government policies are not going to pull us out of the job trap.

One of the tropes about Bush's 9/11 and the wars that followed was that they conveniently allowed him to deal with problems bedeviling his young Administration: a lack of focus, difficulty reforming the U.S. military, trouble articulating a global vision. Obama now faces a host of problems of his own: weakening political will, an inevitable "What next?" after health care, a base that has lost energy. His 9/11 is just the sort of transcendent issue that can reconnect him to the theme of hope and change. A tough challenge? You bet. But as Obama's presidency unfolds, it will be the most vital one for him to meet.

Ramo is managing director of Kissinger Associates and author of The Age of the Unthinkable

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