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Obama seeks new ideas on US jobs

_46847861_-28With the US unemployment rate above 10% for the first time in 27 years, a sense of urgency is growing.

On Thursday in Washington, President Barack Obama held a jobs summit, attended by 130 business leaders, union leaders and economists.

To the assembled experts, President Obama said that the US government must act quickly in the fight against unemployment, but cautioned that he had only limited funds to create jobs.

"We cannot hang back and hope for the best," he warned.

Indeed, any new spending plans aimed at reducing joblessness will run into opposition from Republicans in Congress.

They are already irritated by the billions of dollars spent on emergency bail-outs for banks and carmakers, begun under one of their own, President George W Bush.

Running up budget deficits to be paid for by future generations has a bad name in Washington. So does "big government".

Recession fears

But an economist on the conservative side (he advised Republican presidential candidate, John McCain in 2008), Mark Zandi of, says deficits are a big concern, but not something we can afford to worry about right now.

"That's a problem not for 2009, not for 2010. That's a problem for 2011, 2012 and beyond," he says.

"We have to make sure that we don't go back into a recession, because if we go back into recession, the cost to taxpayers will be even greater.

"The deficits will be measurably larger, so I think it's important to spend more money now."

Mr Zandi says some government spending needs to be focused on state and local governments, whose tax revenues have fallen, so that they do not have to lay off workers. Another top priority is unemployment benefits, which normally run out after six months in the US, though they have been extended in states with the highest unemployment rates.

Mr Zandi sees continuing benefits to unemployed workers as key to maintaining demand, because people who do not have money do not buy things.

That can lead to a downward spiral: if consumers do not consume, businesses cut back on workers, who then have no money to spend either.

Long-term solutions

Another area where Mr Zandi feels the government can make a unique contribution is providing credit to small and medium-sized businesses.

After last year's credit crisis, banks are still reluctant to lend. However, traditionally they have provided capital to smaller companies for start-up and expansion, and these smaller companies typically create the majority of new jobs in America.

Subsidising labour, in the form of tax cuts or subsidies for newly hired workers, could help get the ball rolling, by providing businesses with the confidence and certainty they need to move forward and add staff.

These are all short-term, cheque-book solutions.

America also needs long-term policies to help educate and retrain workers in the hardest-hit industries, such as car manufacturing and construction, two sectors claiming half of all jobs losses during this recession.

Historically, the expense of retraining has been shouldered by workers themselves, but the scale of permanent job losses in some industries warrants a government response.

Mr Zandi insists: "It's clear that even when the economy gets back on its feet, we're going to have very high unemployment in many parts of the country for a long time to come.

"One reason is that the people out of work don't have the skills and education necessary to be employed in the jobs of the future."

States and localities jealously guard their responsibility for education, but they rarely turn down federal money.

As a start, the federal government could fund expanded programmes and study at two-year community colleges which offer technical degrees in growing fields such as healthcare: radiology, nursing and more.

'Shadow unemployment'

Policy makers targeting job creation will need to broaden their view of how many people need help.

While the number of unemployed workers according to official counts stands at 15.7 million, another 9.3 million Americans are under-employed, working part-time because they cannot find full-time work, or have had their hours cut back.

An additional 2.4 million people who are out of work are not even counted as unemployed if they did not look for work during the four weeks preceding the latest household survey.

Statisticians consider them "marginally attached" to the workforce.

One in three of the marginally attached qualifies as a "discouraged worker," who has given up looking for work, because he does not believe there is a job available for him.

So what many are now calling the "shadow unemployment rate" tops 18 million, 27 million including the involuntary part-time workers.

Circling back to the political realities behind the jobs summit, Congressional mid-term elections are less than a year away.

If dissatisfied voters turn out some of the fractious Democrats who currently lend the president a small and unreliable majority, he could end up with even less support for government stimulus programmes.

Source: BBC News

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