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WASHINGTON (MarketWatch) -- With millions of people twiddling their thumbs waiting for a job, the Land of Opportunity is in danger of becoming barren.

Nearly three years into our economic wilderness, we still can’t seem to find our way out.

Fifteen million Americans are looking for work, and most of them know the job they once had is gone for good. Millions more are working, but need something better than part-time hours or a dead-end job.
 
The official unemployment rate is stuck near 10%, and even our best economic minds say it’d take a miracle to bring it down to even 7% in the next two years.

We lost about 8.4 million jobs during the Great Recession, and have regained only about a half million during the sputtering recovery. Counting the people who’ve come of age since 2007, we’re more than 10 million jobs short of what we should have.

Behind every one of those 10 million is a human tragedy.

Jobs. Everyone talks about them, but no one has done anything effective about them.

No workable solution

Employment is our biggest economic, social and political problem. And no one has yet proposed a solution that’s workable, one that’s economically effective and politically viable.

Plenty has been done; it just hasn’t been enough to bring back the jobs we need.

The Federal Reserve has done its best to restart the financial system so credit can flow again. Interest-rates are at rock-bottom, and most of the impaired credit channels have been cleared. Credit is only a trickle of what it once was, because both lenders and borrowers are still repairing their finances from the excesses of the bubble.

There are some members of the Federal Reserve’s policy committee who believe more help may be needed. The Fed could buy more Treasurys from the public in exchange for cash that would be spent (stimulating demand) or invested productively (stimulating supply).

A majority of the Federal Open Market Committee, however, thinks such a policy would be ineffective or even counterproductive. Their minds could change, of course, but as of now, there is no political will at the Fed to do more about job growth.

Fiscal policy has also been tried. The tax cuts, direct aid and infrastructure spending in last year’s stimulus bill boosted total employment by an estimated 1.5 million to 3 million.

Even under the most favorable estimates, the stimulus only filled about a fourth of the employment gap. The private-sector was supposed to pick up the slack, but it hasn’t.
Why not? Simply put: lack of demand.

Paradox of thrift 

The economy is a complex system of flows and relationships. There are two sides (at least) to every transaction: the buyer and the seller. My spending is your income. If I don’t spend, you won’t have any income, so you won’t spend either. In turn, the people you usually buy things from won’t have any income. And so on.

Of course, spending never falls to zero. We all have basic human needs that must be satisfied in the marketplace. But if we all restrict our spending to the minimum (perhaps because we overspent before and are trying to be good), all of us will have less income.

This is the paradox of thrift that is throttling our economy now.

There are those who say that it isn’t right to blame our problems on a lack of demand. They say that what’s holding back job growth is not lack of sales, but onerous government policies, such as high taxes, mandates to buy health insurance and uncertainty about regulations.

Workers cost too much, they say.

This fable of the government smothering the economy in its cradle seems plausible at first, but is surely overstated. Measured against how much they produce, the cost of employing workers has plunged over the past few years, dropping at the fastest pace since the end of World War II.

It’s not the cost of a worker that’s preventing hiring. Rather, it’s the tremendous success companies have had in squeezing more work out of each employee. With sales rising only slowly, and productivity surging, there’s simply been no need to hire additional workers.

Luckily for those of us looking for work, there’s evidence that productivity improvements may now be slowing, which means that companies will have to hire more workers to respond to any increase in sales.

Now, we just have to wait for American households to get comfortable with spending again. Shouldn’t take more than a couple of years.

Rex Nutting is MarketWatch’s international commentary editor.