U.S. Dept. of Labor: Employment Situation Summary
U.S. Postal Service: News Release
Since 2007, Congress has passed three stimulus bills aimed at reviving the ailing economy: a $158 billion tax cut package in 2008, a $787 billion stimulus plan in 2009 and a tax cut and unemployment fund extension plan in 2010. While these packages have forestalled major job cuts, none of these measures have been successful in appreciably reducing the unemployment rate, which remains persistently high at 9.1%. In response, President Obama unveiled a $447 billion job creation bill that was quickly met by partisan opposition and more job losses.
Several major U.S. employers recently announced plans to layoff significant numbers of workers. Bank of America announced a plan to cut 30,000 jobs over the next “few years” as part of a $5 billion cost savings initiative. After cutting 30,000 jobs in 2010, the U.S. Postal Service eliminated an additional 7,500 positions last month in an effort to chip away at its $9 billion debt. The book retailer Borders cut 10,700 jobs and pharmaceutical giant Merck eliminated 13,000 positions. Even the U.S. Army has had to cut back—earlier this year it announced plans to eliminate 8,700 positions.
The continuing economic slowdown has forced companies to search for creative ways to save money while trying to preserve as many jobs as possible. For example, the U.S. Postal Service is redefining large aspects of its business model. It is reducing its overhead expenses by selling its real estate in favor of operating out of third-party retail locations like grocery stores and pharmacies. Similarly, Bank of America views its short-term workforce reductions as necessary to ensuring long term-growth and workforce stability.
President Obama’s plan calls for the creation of new jobs and a reordering of fiscal priorities to help get the U.S. economy back on track. During periods of high unemployment the demand for consumer goods and services declines as fewer people have extra money to spend, production slows due to the decreased demand, and businesses ultimately lose money, which forces them to cut jobs to save money and reinforce the negative economic cycle. President Obama believes that the government can break the cycle by spending money to spur consumption and thereby force companies to increase production, which theoretically requires those companies to hire new workers who become new consumers that spend money and establish a positive cycle of growth. Economists estimate that President Obama’s plan could add 100,000 to 150,000 jobs per month over the next year to lower the unemployment rate by a full point. Opposition to Obama’s plan is rooted in the belief that the government has already tried similar stimulus measures with little success. Notwithstanding the partisan political debate over Obama’s Job Act, many economists believe that stimulus packages and further intervention from the Federal Reserve are ultimately necessary to prevent the economy from falling back into a recession.