Saturday, January 8, 2011

The anatomy of unemployment

It was amusing to watch President Obama spin the latest unemployment numbers, and he'll get away with it people don't take a minute to study the figures. Even if you're employed, you're going to be affected by the unemployed.

The numbers Obama liked: 103,000 new jobs were created last month and the unemployment rate dropped to 9.4 percent, its lowest level in 19 months, the Labor Department said.

What he forgot to mention: the job growth fell short of expectations and the drop in unemployment was mainly because people stopped looking for work.

The Gallup organization looks at the problem: the worsening in the percentage of part-time workers wanting full-time work combined to raise underemployment to 19.0% in December from 18.5% in mid-December and 17.2% at the end of November.

What does it mean when one out of five Americans are either unemployed, underemployed or have given up looking?
People can't pay their taxes: The IRS filed more than 1 million liens in federal fiscal year 2010, the highest in nearly two decades and a spike from the nearly 684,000 filed in the year ahead of the recession's December 2007 start.

People can't pay their mortgages: The number of foreclosures is expected by many to increase in 2011 as more troubled mortgages work their way through the pipeline.

People are clinging to jobs: With retirement accounts decimated, many older workers have stayed in the workforce during this recession, freeing up fewer jobs for younger, less experienced workers.
And here's something else churning beneath the surface among the unemployed: unemployment benefits are running out. The compromise that continued extended benefits didn't extend them beyond 99 weeks.
Ninety-nine weeks is just shy of two years. Given that the recession began exactly three years ago, and that some people live in states that don’t even qualify for all 99 weeks of unemployment, it should be no surprise that some Americans have already exhausted their benefits.

Two years from early 2009 is early 2011. With job creation still sluggish and the long-term unemployed most likely becoming  less attractive candidates to employers, perhaps we should start preparing for a flood of jobless workers newly without safety nets.
Here's a picture of this.

If you are still employed, you'll shoulder more of the load. If your neighbor can't pay his mortgage, the value of your home will be threatened. If your neighbor can't pay his taxes, who will?

We're a hopeful people, but we need to prepare for a less than hopeful future:
The pace of job creation is now only barely fast enough to keep up with population growth. Over the last three months, the economy has added an average of 130,000 jobs a month. If that pace picked up to 200,000 jobs a month, almost 10 years would have to pass before the unemployment rate fell below 6 percent. If the pace picked up to 250,000 a month — roughly what it was in the late 1990s (controlling for population size) — five more years would have to pass.
"The Great Recession may be over," Don Peck writes in The Atlantic. "But this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come."

Hang on.

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