by Rick McGahey, Professor, Milano School, and SCEPA Faculty Fellow

This morning's release of the January unemployment report has good political news for the Obama Administration, but not good enough news for the nation's economic recovery. The unemployment rate fell from 8.6 percent in December to 8.3 percent; it has now dropped almost a full point from the 9.1 percent for August 2011. Payroll employment increased by 243,000 jobs, after last month's increase of 203,000.

Initial responses are very favorable. The Dow Jones average jumped by 140 points in the first half-hour of trading. The Associated Press says there was a "hiring burst" in January , while even Fox Business News calls it a "strong jobs report," creating a "jobs jolt" to the economy.

But the gains in the report, while another welcome signal that the economy is not heading into a second recession, do not mean the economy is out of trouble. The job creation numbers are good, but not great by historical standards, and not enough to recover the losses from the Great Recession any time soon.

The net employment gain of 243,000 for January is one of the highest monthly numbers in all of President Obama's term (gains in March 2011 were around 290,000, and May 2011 had a sharp gain, but almost all from temporary Census workers being hired). In contrast, under President Clinton, average monthly job growth was close to 240,000—that's the average gain for every month in his eight year term.

And what about recovering from the Great Recession? Heidi Scherholtz at the Economic Policy Institute estimates the economy suffers a total "jobs deficit" of over 10 million, taking into account both the losses from the recession, and the job growth needed just to keep up with growth in the population and labor force. Her computation shows that we need 320,000 jobs per month, each and every month, to get to full employment by 2016. That's four years of average monthly growth over 30 percent higher than the figures reported today.

So today's reported progress is good, but it is not nearly enough. And the effects of the too-small stimulus program are running out this year, while state and local government employment and spending declines continue to drag down jobs and economic growth. More stimulus and job creation are necessary, but not possible as Republicans want more economic contraction, in part to damage Obama's chances of re-election. Obama has to hope that the real progress shown in today's numbers keeps up, and that voters will be satisfied that the trend is in the right direction, even though the economy is still not recovering fast enough.

The financial security of the next generation of New York retirees is at risk. If current trends persist, 37% or close to 750,000 workers approaching retirement who live in metropolitan areas of New York State, are projected to be poor or near poor in retirement.

This impeding crisis, documented in a recent report by SCEPA and New York City Comptroller John C. Liu, is due to the decline in employer sponsorship of retirement savings vehicles, the increasing prevalence of defined contribution (DC) plans over traditional defined benefit (DB) plans, and the overall erosion of household savings.

To assess the future impact of these factors on the retirement readiness of New Yorkers, SCEPA has published "New York's Retirees: Falling Into Poverty," a research report on the downward mobility of New York's next generation of retirees. We looked at workers who are currently ages 25-64 and are living in metropolitan areas of New York State (46% of whom live in New York City), and we projected the income stream that will be available to them when they reach age 65.  Results show that if current trends persist, many middle and low income workers will experience downward mobility or a steep drop in their living standards when they retire, and several will face severe economic hardship:

• 23 percent of workers ages 25-64 living in New York State metropolitan areas will not have the assets needed to prevent them from being poor when they retire at age 65. This means their total net worth, including all of their savings for retirement in employer-sponsored plans and Social Security built up over their lifetime, will not be sufficient to keep them above the NYC adjusted poverty level of $13,662.
• 36 percent of workers ages 55-64 living in New York State metropolitan areas who are nearing retirement are at risk of being poor or near-poor, meaning they will be living at or below 200 percent of the NYC adjusted poverty level of $27,324.
• 74 percent of currently low-income workers and 35 percent of currently middle-income workers ages 50-64 living in New York State metropolitan areas are projected to be poor or near-poor in retirement.
• Although workers who participate in a retirement plan are at a lower risk of being poor in retirement than those who do not save for retirement, workers whose primary retirement plan is a DC plan fare significantly worse than those whose primary plan is a DB plan. Thirty-eight percent of workers ages 25-64 whose primary plan is a DC plan will be poor or near-poor compared to only 7 percent of DB plan participants.

On January 26, 2012, SCEPA held a press conference to release the report "Are New Yorkers Ready for Retirement?" The report is the result of a collaborative project with the NYC Comptroller John Liu and is part of a series of reports by the Comptroller meant to shed light on the emerging retirement crisis.

See coverage from several news outlets:

New York 1 News / Money Matters on New York 1 News / Fox 5 News / Bloomberg News / NY Daily News / The Street / Benefits Pro / El Diario / 
Sinovision / World Journal / Sing Tao / Brooklyn Daily Eagle / WBAI

"The deck is becoming increasingly stacked against New Yorkers in their efforts to retire," Teresa Ghilarducci said in a statement. "Fewer New Yorkers have access to the convenience and affordability of employer-sponsored retirement plans. More and more residents now face a choice between retiring into poverty or continuing to work in old age. Without significant policy reforms, the economic tea leaves foretell a decrease in the standard of living for retired New Yorkers."