The economic recovery that officially began in mid-2009 has failed to put a significant dent in the nation's unemployment rate as capital spending and job growth remains muted, Federal Reserve Bank of Cleveland president Sandra Pianalto said Thursday.
Pianalto said it would take 12 million more jobs to return to the 63% of the population who were employed in 2007. She spoke about economic concerns at the National Association for Business Economics conference in Cleveland.
Capital spending on buildings, equipment and software, meanwhile, shrank by 25%, or $400 billion, during the recession. It is the largest pullback in capital spending since the Great Depression and even though investment activity started growing two years ago, spending on fixed business investments has yet to surpass 2007 levels.
"The decline in investment and the closure of facilities actually reduced the total U.S. capital stock for the first time since the Great Depression," she said.
One area directly related to housing is the construction industry's anemic employment levels.
"Unemployed construction workers are often cited as examples of structural unemployment because of a belief that many of the pre-recession construction jobs were never coming back," the Cleveland Fed President said. Structural unemployment refers to the mismatch between labor demands and unemployed workers' skills and ability to relocate.
"Given that construction workers typically have relatively low levels of formal education and relatively high levels of specialized skills that they acquire on the job, some believed their prospects for employment in other sectors were limited."
Pianalto said while the recession grew the number of unemployed construction workers to 1.1 million, or 20% unemployment, the number of construction workers unemployed today is just 300,000 workers higher than in 2007. The number of unemployed workers from construction has declined more rapidly than the total number of unemployed workers in the United States, she said.
Overall, Pianalto believes the growth in construction suggests job layoffs in the sector were not as structural as some had thought.
Still, the number of unemployed individuals in the 20- to 34-year-old range increased by 2.6 million during the recession.
"While it is hard to categorically rule out structural unemployment, people in this age group are typically very flexible about which sector or region they work," Pianalto said.
"In addition, this generation is more educated than prior generations, and that education should be more relevant to current employment opportunities. The employment weakness in this age group points more to a broad-based lack of demand for labor."