Our brief encounter with optimism is now well and truly over. We have had the greatest fiscal and monetary stimulus in modern times. We have had a whole series of programs to pay people to buy cars, purchase homes, pay off their mortgages, weatherize their homes, and install solar paneling on their roofs. Yet the recovery remains feeble. We are at least 2.5 million jobs short of getting back to an unemployment rate of under 8 percent promised by the Obama administration. Concern grows that we are looking at a double-dip recession and hovering near the brink of a destructive deflation. In short, this is news bad enough for Federal Reserve Chairman Ben Bernanke to take the unusual step of characterizing the economic outlook as "unusually uncertain."

Are we at the end of the post-World War II period of growth? We've shoveled in tons of money to rescue reckless banks and fill the huge hole in the economy, but nothing works as it did in previous crises. Rather, we are in what many economists call "the new normal." This is a much slower-growing economy that is causing Americans to let go of the long-held assumption that their children will have it better than they.

What was thought to be normal in the context of post-World War II recoveries? One assumption is that four quarters into the recovery, real gross domestic product would expand at an annual rate of over 6 percent. Instead we are coming out of the current recession at a growth rate of 2.4 percent. In other words, more than two years after the beginning of every post-war recession, we would now usually be at a new peak of economic activity. In this recession, economic activity in real terms is still 1 percent below the pre-recession peak.

We did enjoy a GDP boost from a buildup of inventories anticipating a recovery at normal speed, but it didn't happen. Economist David Rosenberg regards it as "frightening" that, whereas the "normal" rate of increase in final sales is 4 percent annually, this time sales have averaged only 1.2 percent, the weakest revival in recorded history. In short, we can't expect the GDP to grow much more from stockpiling.

The prospect for jobs is dim, too. At this point after the onset of a recession, employment payrolls typically exceed 700,000 jobs above the previous peak. In this recession, we are still down roughly 8 million jobs from the December 2007 peak. As for consumer confidence, the Conference Board survey shows an average of a full 20 points below the average lows of previous recessions.

There seems to be a structural change in the American economy. The relationship of household debt to income has proven unsustainable. The ratio is normally established somewhere below 100 percent, but in 2007 the debt ratio hit 131 percent of income. It has now fallen to 122 percent, but at this pace of pay-down, it would take another five years to bring it under 100 percent. In the meantime, we may well be looking at a vicious cycle of defaults that in turn would produce credit tightening and still more economic weakness, compounding the caution among borrowers, lenders, and public financial authorities.

The most obvious source of distress is the lack of payroll growth, and it is likely to get worse. Real unemployment today is well above the headline number of 9.5 percent. That number held steady only because 1.2 million people gave up hope of finding work and left the labor force in the last three months. Otherwise, the headline unemployment rate would have been around 10.4 percent. Now there are at least 14.5 million Americans still searching for work: 1.4 million of them have been jobless for more than 99 weeks, and 6.6 million have been jobless for over 27 weeks—a stunning reflection of the longer-term unemployment we are coping with.

The unemployment numbers are worse than reported. Last year the Labor Department admitted it overcounted the number of jobs by 1.4 million. Why? Because they used a computer program that tries to extrapolate how many new companies are being created during each month and then guesstimates the number of jobs these firms should be creating. They were wrong. Since April, the Labor Department counted 550,000 nonexistent jobs under this so-called birth/death series. In this economy, where there is virtually no financing for startup companies, it is doubtful whether many of the new companies or the new jobs even existed. Without these phantom jobs, the economy this year created virtually no jobs, certainly not the 600,000 that the administration has been touting.

There is an even darker, though more realistic way, of looking at jobs. In an op-ed piece in the Wall Street Journal, Henry Olsen focused on the ratio of the civilian employment to population. In these terms, America is suffering the largest employment drop since World War II. In 2007, approximately 63 percent of adult Americans had jobs. Today, only 58.4 have jobs—a decline of nearly 5 percentage points. Applied to the 230 million non-institutionalized civilian adults of working age, this decrease means we have nearly 12 million fewer jobs today than we would have if the employment-to-population ratio were still at the 2007 level of 63 percent. This would be the grimmest loss of jobs over the last 60 years.

The Obama administration projects the unemployment rate will drop to 8.7 percent by the end of next year and 6.8 percent by 2013. That is unrealistic. It means we would have to add nearly 300,000 jobs a month over the next three years, at a time when many employers are wary of adding jobs without strong evidence that the economy won't take another downward turn. In fact, at the rate we are growing jobs, it will take anywhere from six to nine years to climb out of this hole. The labor market may be improving, but the pace is glacial.

Private-sector employers are working their employees longer rather than hiring new ones. Many workers who have found positions only after long searches are taking pay cuts just to survive. In addition, state and local governments are cutting jobs in face of a budget squeeze. Putting it all together, the government's broadest definition of the unemployment rate is a staggering 16.5 percent.

There is another equally distressing, long-term perspective on unemployment. From December 1989 through December 1999, the economy gained 21.7 million payroll jobs. During the next decade, from December 1999 to December 2009, the economy lost 944,000 jobs. Even if we exclude the losses that occurred during the recent recession, job gains from 2000 to 2008 were still weak, and are less than half the increase during the same eight-year-span of the previous decade.

If there is one great policy failure of this recession, it is that we have not used the crisis to introduce structural reforms. For example, we have a gross mismatch of available skills and demonstrable needs. Businesses struggle to find the skills and talents to compete in this new world. Millions drawing the dole to sit around should be in training. Higher education is a critical issue. As President Obama pointed out in his speech on education, we have fallen from first to 12th in college graduation rates for young adults. He was right to emphasize that education is more than a cultural issue. It is an economic issue when nearly 8 of every 10 new jobs will require workforce training or a higher education.

That is why it makes no sense for us to have reversed the traditional American policy of welcoming skilled immigrants and integrating them in our economy. In putting people to work by innovation and enterprise, intellectual capital is even more important than financial capital. Yet because of a recrudescent nativism we send back home thousands upon thousands of foreign students who have taken M.A.'s and Ph.D.'s in the hard sciences in this country. Send them back home to compete with us! These are people who create jobs, not displace jobs. The incorporation of immigrants used to be one of the core competencies of the U.S. economy and indeed of the United States. As the president has correctly said, education is not just an economic issue, it may be the economic issue of our time. Witness that the unemployment rate for those who have never gone to college is almost double what it is for those who have.

We must understand, as Obama said at the University of Texas recently, that "countries that out-educate us today ... will out-compete us tomorrow." But if the economics are daunting, the political scene is depressing. Keeping foreign students here, for example, gets us bogged down in emotional debates about immigrants. We have a paralyzed system. Neither the Democrats nor the Republicans seem able to find common ground to address what is clearly going to be an ongoing employment crisis. There's employment here for real leadership.

Check out a roundup of editorial cartoons on the economy.

Check out this month's best political cartoons.