It doesn’t take an economist to know that the economy’s not doing well, nor does it take a doctor to tell you that you’re sick. When you’re sick enough, you see the doctor. Economists play a similar role for the economy.

The majority of economists know the broad outlines of policies to improve employment, the housing market, and GDP. What’s missing is the political will to enact them. While the Obama Administration has moved positively, it’s been far too conservative, and that has resulted in the recovery limping, rather than trotting, let alone galloping along.

Economists differentiate between four different types of unemployment. We’re dealing primarily with a mix of two of them, cyclic and structural unemployment. Cyclical refers to the business cycle – an economy, like a business, has good and bad seasons. If the bad season is shortened, employment will grow. Structural unemployment arises when the skills required of a job don’t match the skills of the unemployed.

Structural unemployment is the major unemployment problem today. About four in 10 of the 12.7 million people who were unemployed in May 2012 had been looking for work for at least 27 weeks. This is a highest rate in the last six decades. Structural shifts are occurring in our economy quite apart from normal business ups and downs.

Reducing structural unemployment takes public spending job creation and re-training. One example of public support is the American Reinvestment and Recovery Act (ARRA). According to the Congressional Budget Office (CBO), in the second quarter of 2012 payroll employment was between 0.2 million and 1.2 million jobs greater than it would have been without ARRA spending. It will take much longer to recover the 8.7 million jobs we lost between 2006 and early 2010. During the Obama Administration, we’ve recovered about 4 million of those jobs.

Whatever your view of public sector jobs, public sector job losses are dampening the economic recovery. Since Obama took office, public sector employment has declined about 3.7 percent (it grew about 4.5 percent during the first 40 months of Bush’s presidency). On June 20, 2012, Fed Chairman Ben Bernanke commented on the role of public spending to improve the economy, noting that spending at all levels of government needs to grow in order to avoid stalling the recovery.

Growing GDP and reducing structural unemployment will take coordinated action between the public and private sectors. ARRA spending is one example. The CBO finds that GDP has been higher each year since 2009 than it would have been without it, with the largest impact in 2010 when GDP was between 0.7 and 4.1 percent higher than it otherwise would have been. Yes, ARRA spending increases public sector employment. In turn, those employed then spend their income in stores that can then buy more stock and add employees.

The housing sector accounts for 20 percent of GDP. When the bubble burst in 2006, that put the downturn in high gear. New building permits leads to construction spending, which leads to construction jobs. Recently, construction permits stopped declining. We can expect that to reduce unemployment over the next 18-24 months.

Continuing to crawl out of this recession will continue to take coordinated action of the kind we’ve seen over the last three years. If we find the political will to increase public spending to help the private and public sectors, we will help the unemployed, improve GDP, and strengthen the housing market.

Robert Procter holds a BA in Economics from Berkeley, an MS from Purdue, and a PhD from Michigan State, both in Agricultural Economics. He’s taught at several colleges, consulted, and is currently employed as a Senior Economist with the Oregon Public Utility Commission in Salem.

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