When President Barack Obama sits down with business leaders Thursday to talk about the ailing job market, the question he’ll ask is simple: How much more can — or should — the government do to get companies to start hiring again?
The answer is turning out to be anything but simple.
The recent slowdown in job losses is welcome but only marks the beginning of the difficult process of rehiring the more than 8 million workers sidelined by the recession. A wobbly economic recovery appears to be under way, but it now seems clear that the unemployment rate is going to remain stubbornly high for years to come.
"That is not going to go down well, politically speaking,” said John Lonski, chief economist at Moody's Investors Service. “Still, you have to ask yourself whether or not there's room for much more in terms of fiscal stimulus.”
The $787 billion stimulus package passed this year is still working its way through the economy, but Congress may be asked to consider additional measures -- perhaps a tax credit for new jobs or other hiring incentives, which could be costly.
The good news in the jobs data is that the pace of layoffs appears to be slowing. The monthly employment report due Friday is expected to show that the economy lost 130,000 jobs in November, which would be the best showing since January 2008. Over the first half of the year the economy was shedding jobs at a pace of nearly 600,000 a month.
New claims for unemployment benefits also have fallen, signaling that the worst of the job losses is over, and the economy could begin adding jobs on a net basis soon.
That’s about as far as the good news goes. The overall “official” unemployment rate stands at 10.2 percent, the highest level since the early 1980s. When so-called “discouraged” and underemployed workers are included, the jobless rate is pushing 18 percent.
More troublesome is the scope of job losses compared to previous recessions. With unemployment still rising, payroll levels have shrunk nearly 6 percent since the recession began in December 2007. That is nearly three times the level of job loss during the last recession in 2001.
After the 2001 recession it took 18 months to restore employment to pre-recession levels. At that rate, even if the economy began adding jobs next month, employment levels wouldn't return to pre-recession levels until June 2014.
There is no shortage of ideas about how to get Americans back to work job more quickly. The first is to try to stimulate demand and convince employers they need more workers to expand production to meet that demand.
That’s one of the objectives behind a proposal to extend unemployment benefits further into next year.
“This is the most effective way to get money into the economy. It’s given to people who are simply out of money,” said Rep. Jim McDermott, D-Wash., a key supporter. “They’re spending it. They’re not socking it away in a mattress somewhere.”
Though Congress extended benefits in November, the law failed to lift a previously approved expiration date of Dec. 31. As a result, an estimated 1 million people will lose benefits by the end of next month; by March, some three million will receive their last weekly check averaging about $315 a week. (Subsidies to help pay for health insurance are also set to expire for millions of jobless workers.)
Letting those benefits expire could hurt the fragile recovery by dampening consumer demand. But opponents of another extension are balking at the cost, which could load another $100 billion onto an already swollen federal budget deficit and add to the $12 trillion national debt.
“Calling more government spending and more debt a 'jobs package’ is laughable, and the Democrats’ frantic push for more of the same is yet another acknowledgment that their trillion-dollar stimulus isn’t working,” said Minority Leader Rep. John Boehner, R-Ohio.
The high-profile White House meeting Thursday with business leaders and economists, coming a day in advance of November's employment report, has taken on an element of political theater. Boehner announced this week that Republicans would be holding their own jobs summit "to provide a platform for economic perspectives that won't be heard at the White House event."
It remains to be seem how much will come of the dueling job events. Washington's gridlock over health care reform, carbon emissions caps and new financial regulations, among other issues, seems likely to limit any actions to fairly modest proposals.
There seems to be fairly broad support, for example, for measures to provide easier access to credit for small businesses, which traditionally have been the biggest job creators. One idea is to expand lending by the Small Business Administration. Such measures would be relatively cheap, but their impact would be correspondingly limited.
That leaves the question of whether government should undertake a broader jobs program —one that could include a combination of additional stimulus spending and tax cuts. Opponents of more spending argue that government does a poor job of creating jobs.
“Business creates jobs; the public sector, government, does not create jobs," said Heritage Foundation economist Alison Fraser. "When it does, it's horrible at them and very inefficient.”
A better solution, argue opponents of more spending, would be tax cuts aimed at getting businesses in a hiring mood.
“I expect there will be a lot of popularity on Capitol Hill, maybe on both sides of the aisle, for a new jobs tax credit,” said former Labor Secretary Robert Reich.
Beyond tax credits for new jobs, other hiring incentives under consideration are a 'holiday' on payroll taxes — which would help both workers and employers — and expanded credits for business investment.
Those measures also likely would add to the deficit. And they are no more targeted than programs that involve direct spending, said Joel Naroff of Naroff Economic Advisors.
“Every time you create an incentive, every business gets it whether or not they were going to be creating new jobs,” he said. “It becomes extraordinarily expensive to do that.”
But doing nothing could carry a bigger price tag.
“You don’t want to go back into recession,” said Mark Zandi, chief economist at Moody’s Economy.com. “If you do, it’s going to cost taxpayers a lot more. Because if we go back in recession we’re not coming out in any graceful way. It’s going to be very painful. So it makes some sense to run a larger deficit in the near term to insure that you don’t go back into a recession.”