GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

In February, the unemployment rate fell to 8.9 percent, its lowest level since April 2009, and the economy added 192,000 jobs, the most since May 2010.

“That’s progress,” trumpeted President Obama, when the data were released on March 4. And his Labor Secretary, Hilda Solis, hailed the news as a notable improvement. “There is no doubt that the economy we preside over today is better than it was two years ago,” she said.

Not so fast. A two-year snapshot might be the appropriate metric for a president who has to run for reelection in 20 months. But a moving picture of the American economy over recent years portrays a far more sobering story. And it suggests that the American job machine is broken and might never be the same. This prospect is something politicians will ignore at their own peril.

After controlling for population growth, notes Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington, “every U.S. job created since Ronald Reagan’s first term was destroyed during the Great Recession.”

The “real” unemployment rate, including those individuals who have given up looking for a job or are working part-time although they would prefer to work full-time, is still 15.9 percent.

At the current rate of job creation it will take until 2019 to get back to the pre-recession unemployment rate of around 6 percent. And the inflation-adjusted median wage of American males is now 28 percent lower than it was in 1969.

Overall, U.S. job performance fares poorly in comparison with that in Europe, the advanced economy that is America’s benchmark. “The traditional notion of the U.S. labor market as a superior ‘job creation machine’ is far less true in the post-crisis era than in earlier periods,” Kirkegaard writes in a paper soon-to-be published by the German Marshall Fund of the United States.

The obsession of headline writers and politicians with the unemployment rate has long masked far more disturbing news about the U.S. employment rate—that portion of the American working age population age 16 to 64 that actually has a job.

The employment-population ratio measures an economy’s success producing what its citizens want most: a job. Moreover, it is a better indicator of the state of the labor market than the unemployment rate, which is highly subjective—as the discrepancy between the headline unemployment rate in the United States and the much higher “real” rate demonstrates.

As a job creator, the American economy has been failing its citizens for years. The U.S. employment rate was 66.6 percent in the third quarter of 2010. It was roughly 70 percent in 1992.

Why does this matter? As Heidi Shierholz, an economist at the Economic Policy Institute, points out, if the labor force participation rate had held steady over the last year, there would be roughly 1.5 million more workers in the U.S. labor force today and the unemployment rate would be 9.8 percent, not 8.9 percent.

Moreover, Kirkegaard adds, in the early 1990s the U.S. employment rate was higher than that in any major European economy. Today, 71.5 percent of eligible Germans are employed and 70 percent of the British are. And the U.S. employment rate, which 20 years ago was about 8 percentage points higher than the average in Europe, is now about 1 point higher.

Some of this difference can be explained by Europeans’ decision to cut work hours rather than jobs during the downturn. Nevertheless, the hourly performance gap between Europe and the United States has also narrowed dramatically. U.S. hours worked per capita dropped by 70 hours annually from 835 in 2008 before the Great Recession to 765 hours in 2010, according to data from the Conference Board. Meanwhile, hours worked per capita in the 15 core European Union nations dropped just 26 hours, from 735 hours in 2008 to 709 hour in 2010. So while Americans who are working are laboring longer than their European counterparts, the difference in their work hours has been nearly halved. And this is not by choice.

“European labor markets have weathered the effects of the Great Recession noticeably better than that of the United States,” writes Kirkegaard.

But the moving picture is even more damning. According to new calculations by the Hamilton Project at the Brookings Institution, the median wage of all American males, both those working and those who have dropped out of the workforce, has declined by almost $13,000 after accounting for inflation in the four decades since 1969.

This does not just signify the failure of the American dream. It is a troubling foreshadowing of a long American nightmare.

The job picture is likely to improve over the next few months. And this will, undoubtedly, be heartening news for the administration. But all Americans should be disheartened by the absolute and relative decline in the U.S. job machine. Something is terribly wrong with America’s ability to create employment for its people. This, and what to do about it, not the monthly gyrations of the unemployment rate, should be issue No. 1 in the upcoming election.