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So Where Are the Jobs?

February 20th, 2010 at 09:01am Under Economy Report

This is the VOA Special English Economics Report.

America’s economy has started to grow again. Now what about jobs?

The government says productivity jumped in July, August and September. That meant companies produced more with fewer workers. Also, new claims for unemployment aid fell last week to the lowest number since January.

People waiting in line at a job fair in Livonia, Michigan

But eight million jobs have disappeared since the recession began in December of two thousand seven.

Jack Strauss at Saint Louis University in Missouri says recent recoveries have been slow to create jobs.

JACK STRAUSS: “Historically, during our last two recessions in ninety-one and two thousand one it’s taken twenty-three months in ninety-one and about thirty-six months, three years, in our last recession in two thousand one for the United States to regain the jobs lost in the recession.”

Experts debate the reason for these so-called jobless recoveries. But Professor Strauss says a banking crisis is especially hard to recover from, because there is less money to lend to support growth. Banks have been holding bigger safety reserves.

On Wednesday, the Federal Reserve kept its target rate near zero for overnight loans between banks. The central bank said levels are likely to remain “exceptionally low … for an extended period.”

Low interest rates and growing federal deficits have weakened the dollar. But that also lowers the price of American exports, which could help drive job creation. Yet where exactly will future jobs come from?

Investor Warren Buffet says America’s “future prosperity” depends on its rail system. On Tuesday his Berkshire Hathaway company agreed to buy the nation’s second-largest railroad, the Burlington Northern Santa Fe. The forty-four billion dollar deal is Berkshire’s biggest ever.

The Obama administration is also putting money into transportation to speed recovery. A program that paid Americans to buy new vehicles with higher fuel economy lifted sales for automakers. Ford just reported a profit of almost a billion dollars for July through September.

A second government program — a tax credit for first-time home buyers — has helped the housing market. These two programs fueled a lot of the recent economic growth.

But economist Jack Strauss says credit conditions threaten the main engine of job growth since two thousand one — small businesses.

This week, CIT, a lender to small and medium sized businesses, sought bankruptcy protection from its creditors so it can reorganize. Taxpayers will likely lose more than two billion dollars in federal rescue money.

And that’s the VOA Special English Economics Report, available online at voaspecialenglish.com. I’m Mario Ritter.

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US Says Economy Grew 3.5 Percent in Third Quarter

February 14th, 2010 at 08:53am Under Economy Report

This is the VOA Special English Economics Report.

Early estimates show that the United States economy began to grow again in July, August and September. The three-and-a-half percent growth was the first expansion in more than a year, and the strongest in two years.

The government said increases in consumer spending and exports and improvements in business investment led the growth. So did increased federal spending and housing investments.

The economy is growing again, but when will jobs follow? Job seekers attend a jobs fair in Little Rock, Arkansas, Tuesday.

But high unemployment could limit growth for some time.

President Obama had this reaction to Thursday’s report on the gross domestic product — a wide measure of goods and services in the economy.

BARACK OBAMA: “This is obviously welcome news and an affirmation that this recession is abating and the steps we’ve taken have made a difference. But I also know that we’ve got a long way to go to fully restore our economy and recover from what’s been the longest and deepest downturn since the Great Depression.”

That downturn was partly caused by bankers and others taking irresponsible risks to earn huge payments. So say their critics.  Criticism of Wall Street pay  is nothing new. But never before has the government used hundreds of billions of dollars to rescue companies that made risky investments.

In June, the Obama administration appointed lawyer Kenneth Feinberg as the “special master” on executive pay — also known as the pay czar. Congress gave him power over compensation of the twenty-five highest-paid employees at seven companies most indebted to taxpayers.

This week, he gave lawmakers a progress report.

Kenneth Feinberg

KENNETH FEINBERG: “We greatly reduced the amount of cash that would be made available to these senior officials. We reduced that cash by approximately ninety percent.”

The seven companies are in the financial and auto industries. Now Kenneth Feinberg must consider their next seventy-five highest paid officials.

But some management experts warn that limiting pay could make it harder for taxpayers to get their money back. Edward Lawler at the University of Southern California says these companies may now have difficulty getting and keeping high-quality employees.

But he agrees that in recent years, many companies have tied pay to short-term performance, instead of their long-term health. He also says boards of directors need to do more to control pay.

EDWARD LAWLER: “We could have boards that do a much better job of designing compensation plans. If we had good boards, I think they could certainly do a better job of that than the government can.”

Last week, the Federal Reserve proposed to examine pay policies at thousands of banks. The central bank would reject policies that it thought might cause bankers to take too much risk.

And that’s the VOA Special English Economics Report. I’m Mario Ritter.

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