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The State of American Unemployment

April 22, 2012

by Philip Ehrensaft

TAKE ALL 25 MILLION American adults currently counted in the Bureau of Labor Statistics’ most comprehensive U.S. unemployment data as of this writing — the “U6” or “real” unemployment rate, estimated at 16.2 percent in January, 2012. (The standard “U3” or “official” rate, 8.3 percent, doesn’t count people working part-time for lack of full-time work or unemployed people who have given up on finding jobs.) Force them to move to a brand new, fifty-first state. This new State of the American Unemployed, SAU, would almost tie with Texas as number two in population rankings. (Actually, SAU would rank number two because a big chunk of Texans would have to emigrate there.) With family members forced to make the move as well, the population of SAU would easily outnumber California’s 37.8 million.

SAU would have a high youth population. The Kids Aren’t Alright, an aptly titled 2010 report by the Economic Policy Institute, showed even the U3 rate for people ages 16 to 24 standing at 18.1 percent. A rough estimate of the U6 rate would be 32 percent. SAU would also have a Jewish population of roughly 390,000, numbering fourth after New York, California, and New Jersey. Brandeis’ Steinhardt Social Research Center estimated the total 2010 American Jewish population at 6.5 million, including close to five million adults. Applying labor force participation rates, community surveys indicating Jewish unemployment rates running around half of national rates, and U6 “real unemployment” rates, I guess-estimate an SAU Jewish population of 390,000.

LIVING UNDER under current American unemployment policy, the citizens of SAU would be offered the stingiest safety-net benefits of any advanced industrial economy. Dr. Marianne Hill, senior economist at Mississippi Institutions of Higher Learning, has painstakingly assembled a national unemployment insurance profile from fifty messy state data sources. It shows that only 37 percent of unemployed Americans were eligible for regular unemployment insurance in 2008, the sledge-hammer year of the Great Recession. Even emergency supplemental programs did not bring that proportion above 50 percent.

Add to this the fact that unemployment insurance payments are typically lower per week and last fewer weeks than in other advanced economies, and that many notoriously inefficient state bureaucracies impose long waiting periods before giving what’s owed. You will then pardon the residents of SAU if they are skeptical of the establishment consensus that June 2009 marked the end of the Great Recession (which kicked off in December 2007), and that rates of unemployment and under-employment will promptly wind down after fundamentals like rebuilding inventories or new investments increase the growth rate of the Gross Domestic Product.

OVER-PREDATION is an ecological term that comes readily to mind when one looks at both real unemployment and galloping income inequality in the USA. Intelligent predators don’t overhunt their territory, for if they gobble up too many victims or devour too much of their food supply, the survivors won’t be able to reproduce in sufficient numbers to provide tasty meals in the future. Yet over-predation is a very old affair:


Those who add house to house

and join field to field

Till there is room for none but you

To dwell in the land!”

—Isaiah 5:8

Of course, if the predators can readily move to a new territory, there’s no limit on their gluttony. Perhaps the American predatory class thinks that it can now drop Americans and seize juicy new prey in Asia and beyond — but the Chinese and Indian elites already have their territory marked. Power is returning to Asia, where it was before Europe’s commercial and industrial revolutions swept the globe. American elites therefore better think about how to sustain their own hunting grounds — first, by recognizing how severely stressed those grounds are. After all, the world economy as a whole did not go into a Great Recession post-2007. East Asia, led by China, and South Asia, led by India, and much of Latin America, led by Brazil, are driving global growth rates surpassed by only one other period in modern history, the post-war boom of 1945-1970.

An America that adapts itself to the new, shared balance of economic power could prosper; an America that fails to adapt will not. Unfortunately, adaptation is not the strong suit of our country’s economic elites, who have skewed political and cultural power to an extent that now counters their own long-range interests.

From the 1930s through the 1950s, conservative business circles never accepted the New Deal and Keynesian economic policies that were saving the capitalist system from self-destruction, but they had no credible strategic ideas with which to launch a counter-movement. That changed, however, when conservatives acquired an intellectual base from the very brilliant Milton Friedman, whose monetarist free market model offered conservatives a coherent strategy for attacking hitherto dominant Keynsian policies.

Ronald Reagan was then able to turn the national office of the Republican Party into a richly funded, dominant political force in conservative politics. By the time of George W. Bush’s presidency, Republican strategists were talking openly of creating a permanent structural imbalance in American politics through partisan judicial appointments plus gerrymandering. Our essentially 18th-century government system provided ample opportunities for business lobbyists to reconstruct the fundamentals of legislation and administration in the interests of the rich and powerful.

So the post-war, post-Depression golden era of American and European economic expansion came to an end. Innovation and production assumed second place to “financialization,” speculative profits earned from computer-modeled stock trading based on short-term returns and, literally, options on options to trade stocks, bonds and commodities. Redistributive tax policies, a strong working class undergirded by manufacturing and labor unions, and a middle class with secure employment were crippled. A reconcentration of income, wealth, and power in the hands of America’s upper class took off.

By “overhunting” rather than conserving the resources of their hunting grounds, America’s “1 percent” has created substantial impediments to economic recovery. For example, as documented by a McKinsey Global Institute report (“An Economy That Works: Job Creation and America’s Future,” 2011), many American enterprises that are willing to hire are not able to fill open jobs because of inadequate education among American workers. This paradox — contrast it to Germany’s labor force and education policies — is a product of the institutional and political gridlock of America’s brand of capitalism, which denigrates government’s capacity to act for social good and puts a big question mark over our chances of turning things around.

IN JANUARY, 2012, the Bureau of Labor Statistics’ estimates showed real if modest decreases in unemployment rates — but the word “modest” must be boldfaced and underlined. The U.S. labor market actually offers fewer jobs now than eleven years ago, for a working-age population that has grown via natural increase and immigration. The ratio of unemployed workers to job openings has been greater than 4:1 since January 2009. That same month, the Economic Policy Institute’s Heidi Shierholz estimated that at present improvement rates it would take until 2019 to reach full employment. That’s a lot of wrecked lives along the way.

Compared to earlier recessions, a much higher proportion of unemployed people today are long-termers, jobless for six months or more. Their ranks actually increased to 5.6 million people, 43.7 percent of the unemployed, from December 2011 to January 2012, despite the lowering of the official unemployment rate. These dismal statistics are reinforced by discriminatory policies by employers, who actually place want ads specifying that unemployed people need not apply [NYT, 2011].

The restrained uptick in the economy may be adequate to assure Obama’s reelection against a “moderate” candidate like Mitt Romney (whose career includes predatory hollowing-out of American companies and workers’ lives). If so, we can probably expect some modest damage control on the pace of predation by America’s elite, but not much. Nate Silver’s 0 (ultraconservative) to 100 (ultraliberal) scale for measuring political stances puts Romney smack dab in the middle with a score of 50, and Obama at 57. Even more revealing has been Obama’s systematic staffing of key economic positions with people from orthodox financialization backgrounds.

The 1 percent has created a “moral hazard economy,” rigged to their advantage: They are permitted to take risks and pocket the gains if they win, but to transfer losses to the rest of us if things go the other way. The federal bail-out of the very banks that provoked the financial meltdown, while millions were allowed to lose their jobs and homes, is a prime example of “moral hazard” policy run wild. Such policy erodes the ethical glue that sustains a viable society. The $64,000 question ($64 million in today’s money) is whether that cohesion is already destroyed.

Philip Ehrensaft heads Metro Countryside Research (Pine Bush, NY and Ottawa, ON) and analyzes local economic development and labor markets. He keeps his sanity, especially during the Great Recession, via music journalism, with a focus on opera, contemporary composition and improvisation, and Jewish music.