Is America headed in the wrong direction, as Democratic vice presidential candidate John Edwards suggests?

On Labor Day, AFL-CIO President John J. Sweeney joined workers in Davenport, Iowa and the Twin Cities in Minnesota. He said, “This is not just the most important election in our lifetime, it will also be the toughest. Bush is the most negative candidate we’ve ever seen, and that’s because he has such a horrible record. We have to keep the focus on the real issues – health care, education, jobs, pensions and Social Security. We can’t let the issues be ignored or distorted. And we can’t let the election be stolen.”

A Labor Day report by the labor-backed Economic Policy Institute (EPI) said the economic state of the union today is “a stark contrast to three years ago, before the recession began. With 10 million unemployed U.S. workers searching for work or too discouraged to look, the nation’s working families see no relief in sight as job growth has sputtered and real wages have fallen.”

“The costs of basic necessities like health care, housing and college keep rising, and many working families’ incomes are not keeping pace,” says Sylvia Allegretto, an EPI economist and one of the authors of The State of Working America 2004/2005, released Sept. 5.

Historically, it takes an average of 20 months to recover all the jobs lost in a recession. So far, more than three years into an economic recovery, the nation still is nearly 1 million jobs short. The current unemployment rate of 5.4 percent is significantly higher than the 4.3 percent rate of three years ago.

In addition, some 2.1 million people have dropped out of the workforce since 2001 and are not counted in the government’s jobless figures – meaning the official unemployment rate would skyrocket to 7.3 percent if they were included in the official unemployment figures, Allegretto says.

Not only are fewer workers employed, they are working for less, the report shows. Jobs in industries that are declining, such as manufacturing, typically paid more and provided such benefits as health care and pensions. The nation has lost 2.7 million manufacturing jobs since President George W. Bush took office in 2001.

Jobs in growing industries, including those in the service industry, pay significantly less and often do not include health or pension coverage. In growing industries, total annual wages and benefits for workers averaged $35,546 between November 2001 and June 2004, compared with $61,983 for industries that are shrinking, according to EPI.

And analysts say the trend toward lower-wage work with few or no health and pension benefits likely is long-term, according to a new AFL-CIO report, Declining Job Quality: Here to Stay?

The jobless recovery has hit the nation’s low-income workers the hardest. New U.S. Census Bureau data show some 35.8 million people lived below the poverty line in 2003, up from 34.5 million 2002. Included in the poverty figures are 12.9 million children, an increase of 800,000 children since 2002 – the highest child poverty level in 10 years.

Workers’ health and retirement security also is increasingly at risk, EPI reports. Less than half the workforce – 45.5 percent – were covered by an employer-provided pension plan in 2002, a drop from 48.3 percent in 2000. While more than 60 percent of high school graduates had health coverage on the job in 1979, only about 40 percent have it now. Some 25 percent of high school graduates have employer-paid pension benefits, compared with nearly 40 percent in 1979.

The report provides “a stark reminder of what’s at stake when the job market remains as weak as it has been over the past few years,” says Jared Bernstein, EPI’s senior economist. “When such conditions prevail, the overall economy may be posting impressive gains, but the benefits of growth elude the millions of working families largely responsible for that progress.”