The Unemployed Economy

http://economix.blogs.nytimes.com/2013/06/07/long-term-jobless-still-a-bleak-picture/

http://www.nytimes.com/2013/06/10/opinion/krugman-the-big-shrug.html?emc=eta1

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"We talk about quality in products and services. What about quality in our relationships, quality in our communications, and quality in our promises to each other?" (Max De Pree)

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I think I'm living in an alternative universe but Annie Lowrey and Paul Krugman are helping me with that. Economists and politicians are actually happy that unemployment is down to 7.6%! Lowrey points out that long-term unemployment counts 4.4 million workers that have been out of a job for more than six months. That's not a statistic - that's people!

If you break down the demographics, the number of people (May, 2013) who report being out of work for less than 5 weeks has almost returned to the same level as in 2007. But the number of people unemployed 5 to 14 weeks is about 25% higher. For those out of a job 15 to 26 weeks, it's 78% higher. And, the number of long-term jobless, those unemployed for more than 27 weeks, is 257% higher! So, the longer a person is out of work...

Krugman defines normal (pre-crisis) as an economy adding a million or more jobs each year, enough to keep up with the working-age population. Normal meant an unemployment rate not much above 5%. And, while there was some unemployment, normal meant very few people out of work for extended periods.

Back then (pre-crisis), I was arguing that I didn't want to see an economy where 5% unemployment was what economists thought was necessary for things to hum along smoothly. Ridiculous.

Krugman goes on to help me with the language of economics: "For more than three years, some of us have fought the policy elite's damaging obsession with budget deficits, an obsession that led governments to cut investment when they should have been raising it, to destroy jobs when job creation should have been their priority. That fight seems largely won -- in fact I don't think I've ever seen anything quite like the sudden intellectual collapse of austerity economics as a policy doctrine."

Krugman goes on: "But while insiders no longer seem determined to worry about the wrong things that's not enough; they also need to start worrying about the right things -- namely, the plight of the jobless and the immense continuing waste from a depressed economy. And that's not happening. Instead, policy makers both here and in Europe seem gripped by a combination of complacency and fatalism, a sense that nothing need be done and nothing can be done."

There's a reason why Krugman has a Nobel.

Alan S. Blinder, writing this week in the Wall Street Journal (6/10/13 Opinion), points out that the Brookings Institution's Hamilton Project estimates each month what it calls a jobs gap defined as the number of jobs needed to return employment to its prerecession levels and also absorb new entrants into the labor force. The project's latest jobs-gap estimate is 9.9 million jobs. At a rate of 194,000 a month, it would take almost 8 more years to eliminate that gap.

To quote Blinder: "So any complacency is misguided. Rather, policy makers should be running around like their hair is on fire."

Blinder has concrete ideas about what to do that could work. Speaking of "fire," I'm thinking of that old saying about "Nero fiddles while Rome burns." Nobody in government is even surfacing ideas about what to do on the employment front.

Short term, we're not in a "recovery." We're in a "non-recession" because the GDP numbers are up and not down. Long term, I'm guessing appropriate growth will be back by 2020. But, at what price?