In an earlier and different time in America, Labor Day was celebratory, a transition from the leisurely light-hearted summer to the more serious autumn, and a return to the busy rhythm of school. This year, Labor Day is a grim reminder of an American economy that cannot produce new jobs. How did we get here and how do we get out of this mess?
Lies and Statistics
Friday, the stock market rallied on a better than expected unemployment report. But behind the statistics there was little reason for optimism. Mike Larson of Money and Markets analyzes Friday’s Labor Department report:
- The economy shed another 54,000 jobs in August after losing a similar number in July and 175,000 in June. If you strip out the impact of the Census, you see that private industry created a paltry 67,000 jobs last month. That’s far, far too low to bring down unemployment.
- Speaking of unemployment, it rose to 9.6 percent in August from 9.5 percent in July, a three-month high. And if you include all unemployed and UNDERemployed workers, you get a whopping 16.7 percent of American workers who are discouraged, only able to find part-time work because full-time work isn’t available, and who have just given up looking entirely!
- Then look at who’s hiring and who’s not! Education and health care continues to see reasonable growth, with 45,000 jobs added. But hiring health care workers to take care of an aging population isn’t going to drive your economy long term. See America’s Unemployment Nightmare
The problem is that higher paying economic sectors are either not growing or continuing to lay off workers:
Economically sensitive sectors are showing virtually no growth, with only 13,000 jobs added in leisure and hospitality and 19,000 in construction. Manufacturing shed 27,000 workers … trade and transport lost 9,000 jobs … and financial firms cut workers for the fourth month in a row. In fact, the “diffusion” index which tracks how many industries are adding jobs versus how many are cutting jobs sank to 53 from 56.7.
And let’s step back and look at the big picture for a minute. We’ve added just 650,000 jobs in the first seven months of 2010. We lost 8.4 million jobs in the recession that started in December 2007. It would take several YEARS to get back to even at this pace. See America’s Unemployment Nightmare
A Look at the Real World
Much reporting of the Great Recession (Depression) comes from New York, Los Angeles or Atlanta based media. Few of these outlets examine what is really going on in most of the country. Michael Panzer in Financial Armageddon looks at who is really being hurt:
- Two million workers over age 55 are looking for work. Over a million have been out of work for six months or longer. The unemployment rate in this age group is 7.1%, the highest rate since the 1940’s.
- A sector of the work force denominated as “middle-skill, middle-wage” has been decimated. These are entry level white collar jobs such as administrator or secretary, or blue collar jobs such as assembler or machine operator. Instead of finding good paying jobs, these workers are taking massive pay cuts to work as wait staff or other service personnel, or health aides in homes or health care facilities.
- Among young blue collar workers employment has fallen 18%.
- Middle class and upper middle class managers and professionals are seeking assistance from social service agencies due to unemployment or underemployment. Former donors to these agencies have become recipients of their services.
- A recent Rutgers study found “that 73% of Americans have either been unemployed themselves (14%) or saw an immediate family member (12%), another member of their family (30%) or a close friend (17%) lose a job.” See Another Installment of ‘Scenes from a V-Shaped Recovery’
Why Intractable Unemployment?
Explanations of “we couldn’t see this coming” or “it was just bad luck” mask several reasons for our current state of unemployment:
- Technology is a “game changer.” Technology will replace many lower skilled administrative and manufacturing jobs (postal workers, telephone operators, computer operators, etc). See e.g. 23 Occupations That Will Never Recover from the Great Recession
- Outsourcing – Closely allied to technology is the outsourcing of jobs to other countries. With high speed telecommunications, sophisticated software, larger faster ships and lax foreign labor and environmental standards, American companies will continue to outsource jobs.
- Financial Excess- The combination of financial engineering of mortgage back securities, subprime loans and a zero interest rate policy misallocated capital to the housing sector. With the inevitable housing bust, we destroyed construction jobs and supporting professions such as law, mortgage banking, appraisal, insurance brokers and real estate brokerage. Moreover, until bad debt is completely recognized and restructured or defaulted upon, the banks will continue limiting new loans.
- Government Policy – Small business owners are the growth engines for new jobs. Faced with new health care mandates and the prospect of heavy fines, new business owners are reluctant to expand. A full description of the problem is outlined in “Angel Heart” and Obamacare.
Many of these issues were identified in The New Reality: Permanent Job Loss and Why This May Be Worse than the Great Depression.
Wall Street spokespeople and the Obama Administration have been less than candid with the American public about what the real prospects are for reducing unemployment. While there is a certain inevitability about technological progress, poor government policy is not necessary. We need to stop some of the self-inflicted wounds of zero interest rates, poor tax policy, wasted stimulus and new mandates, all of which impede economic growth and stymie new hiring.
loading...
