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Saturday, October 1, 2022


We Can Only Dream

We Can Only Dream

Courtesy of Michael Panzner of Financial Armageddon 

Children play with giant bubbles at the Glastonbury Festival 2010 in south west England, June 23, 2010. Picture taken June 23, 2010. REUTERS/Luke MacGregor (BRITAIN - Tags: ENTERTAINMENT SOCIETY)

Reports like those that follow help make it clear that the problems we face are structural rather than cyclical. Myriad bad policies and a distorted sense of economic reality — no doubt fed by ruthlessly self-interested corporate and political interests — encouraged large numbers of Americans to acquire knowledge, skills, and perspectives that are really only relevant in an easy-money-fueled economy.

Once the bubble bursts, however, they are as unprepared for changing times as a proverbial fish out of water. And yet, we still have a growing chorus of mindless Keynesians, ivory tower economists, Wall Street strategists, and assorted other pseudo-experts pushing for more stimulus, more borrowing, more tax cuts — more of the hair of the dog that bit us to begin with.

If government is going to do anything at all — which seems inevitable, like it or not — wouldn’t it be better if the those in charge focused on telling people the cold, hard truth about where things stand; directed efforts towards helping Americans adjust to a new operating environment, instead of the one that is not coming back; and, rejigged policy incentives — like those that favor borrowing and homeownership — in ways that might prove more beneficial in the long run?

Oh well, we can only dream.


"U.S. Jobless Rate Hints at Permanent Shift" (The Globe and Mail)

As the United States continues its battle with high unemployment, policy makers are confronting a troubling question: What if they’ve been taking the wrong approach to fixing the ailing job market?

Some prominent economists and policy makers are…suggesting the real problem isn’t lack of consumer spending – it’s that the unemployed don’t have the right skills to fill the jobs that are open.

These people are now theorizing that the financial crisis has altered the structure of the U.S. labour market, perhaps permanently.

If they’re right, the Obama administration and the Federal Reserve will need to change their approach to increasing employment because their current one, which is aimed at stoking spending, could end up exacerbating the conditions that led to the financial crisis.

Raghuram Rajan, a professor at the University of Chicago’s Booth School of Business, argues the U.S.’s high unemployment rate is the result of structural changes rather than a cyclical downturn in demand. He reasons the U.S. housing bubble and the boom in world trade over the last couple of decades created millions of jobs that won’t be coming back. That leaves millions of construction and factory workers without a decent paycheque, and lacking the experience for higher-skilled jobs.

"For Many Unemployed Workers, Jobs Aren’t Coming Back" (Los Angeles Times)

The U.S. economy will eventually rebound from the Great Recession. Millions of American workers will not.

What some economists now project — and policymakers are loath to admit — is that the U.S. unemployment rate, which stood at 9.6% in August, could remain elevated for years to come.

The nation’s job deficit is so deep that even a powerful recovery would leave large numbers of Americans out of work for years, experts say. And with growth now weakening, analysts are doubtful that companies will boost payrolls significantly any time soon. Unemployment, long considered a temporary, transitional condition in the United States, appears to be settling in for a lengthy run.

Major employers including automakers and building contractors were at the core of the meltdown this time around. Even when the economy picks up, these sectors won’t quickly rehire all the workers they shed during the downturn.

Many small businesses, squeezed by tight credit and slow sales, similarly aren’t in a hurry to add employees. Some big corporations are enjoying record profits precisely because they’ve kept a tight lid on hiring. And state and local governments are looking to ax more teachers, police officers and social workers to balance their budgets. Meanwhile, U.S. legislators have shown little appetite for a new round of stimulus spending.

It all points to a long slog for the nation’s unemployed. In May, a record 46% of all jobless Americans had been out of work for more than six months. That’s the highest level since the government started keeping track in 1948, and it’s about double the percentage of long-term unemployed seen during the brutal recession of the early 1980s.

"Elevated Unemployment Appears as the ‘New’ Normal" (STLtoday)

Economists list many reasons for structural unemployment, from the political to the personal.

The government has extended unemployment benefits for 99 weeks instead of the standard 26, making the job search less urgent for some laid-off workers. Conservatives have been making that an issue, but Prakken thinks it’s a minor factor.

Personal factors are probably more important. Workers are slow to give up on finding jobs in their old fields, and reluctant to take a lower-paying position. Switching careers requires new skills, and training takes time.

In addition, the new job opportunity may be in a distant city. Moving becomes tougher when you own a house in a depressed real estate market.

"There’s a new normal because what has been driving the U.S. economy was housing and increased consumption," Strauss says. "We’re not going to be led by consumption growth going forward."

During the 10 years preceding the peak of the bubble in 2007, about 4mn jobs were lost in the US manufacturing sector, whose share in total employment fell from more than 17% to 12%. Unemployment remained low because the booming domestic economy created enough jobs in services and construction.

Reversing this shift quickly seems impossible. Most construction workers are rather low-skilled and thus cannot be re-deployed to modern high-tech manufacturing. The same applies to real-estate agents, social workers, and managers of credit-card accounts.

"Structural Adjustment Poses Challenges to US" (Gulf Times)

During the bubble years, the situation was exactly the opposite: most of the workers released by a rapidly shrinking manufacturing sector could be employed easily in construction and social services, which require only low skills (likewise, real-estate services demand only rather general skills).

The key point is not that manufacturing jobs are somehow better, but rather that we must consider the asymmetry in the structural-adjustment process. It is relatively easy to manage a structural shift out of manufacturing during a real-estate boom, but it is much more difficult to re-establish a competitive manufacturing sector once it has been lost.

Post-bubble economies thus face a fundamental mismatch between the skills available in the existing work force and the requirements of a modern export-oriented manufacturing sector. Unfortunately, there is very little that economic policy can do to create a strong exporting sector in the short run, except alleviate the social pain. Labour-market flexibility is always touted as a panacea, but even the highest degree of it cannot transform unemployed realtors or construction workers into skilled manufacturing specialists. Experience has also shown that retraining programmes have only limited success.

"Long-haul Unemployment – a Reality for Nearly Half of Job Seekers" (Inland Valley Daily Bulletin)

Nearly 2.3 million Californians remain unemployed, and 980,000 of them have been looking for work for more than half a year – up nearly sevenfold from 143,600 counted in July of 2007, according to a report issued today by the California Budget Project.

Each month about 3,000 unemployed stop by the resource center to peruse job openings, attend career workshops or apply for unemployment

Luanne Rodriguez, an employment counselor, helps Carlos Rosas of Ontario fill out school paperwork on Friday at the San Bernardino County Department of Workforce Development in Rancho Cucamonga. (Mediha Fejzagic DiMartino, Staff Photographer) benefits. More than 70 percent of them have been without a job longer than a year, said Tony Gomez, center’s manager.

"It’s very difficult," Gomez said. "I’m not selling hope. But in this room there are so many sad stories every day, it doesn’t stop. They’re desperate. We are here to offer support and give guidance and encouragement."

And it’s not that long-term unemployed don’t want to work – there were five job seekers for every job opening in June 2010, according to CBP, a nonprofit seeking fiscal reforms to benefit low- and moderate-income Californians.

"This means that for four out of five unemployed individuals, there are literally no jobs," the report stated.

Less than 10 percent of those unemployed for more than eight months found work in late 2009, compared to 31 percent of those who had been unemployed for four weeks or less, according to the report.

"People want to go back into the field they came out of," Gomez said. "But some of those are now obsolete. The technology is changing. Jobs in our area are in medical field, in manufacturing, logistics, and anything green."

More than 86 percent of workers nationwide who were laid off, lost their job because their positions were permanently eliminated, the July statistics showed.

Permanent layoffs also "reflect a structural decline in construction and financial activities due to the housing bust," forcing workers in declining sectors of economy to get re-trained and prolonging their job hunt, the CBP report stated.

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