Report: Unemployment Crisis May Last Until 2020
If job growth continues at the anemic pace that it has been on in 2010, it could be quite some time before we return to the "Good Old Days" of 5% unemployment.
A particularly scary projection over at Investors Business Daily:
So far in 2010, the U.S. has added just 613,000 jobs — for a monthly average of 68,111.
Employment bottomed in December 2009 at 129.588 million — two years after peaking at 137.951 million. At this year’s pace, the U.S. won’t recoup all those 8.36 million lost jobs* until March 2020 — 147 months after the December 2007 high.
That would obliterate the old post-World War II record of 47 months set in the wake of the 2001 recession.
The current jobs slump also is the deepest of any in the post-war era, with payrolls down as much as 6.1%. They are still 5.6% below their December 2007 level.
With state and local governments likely to shed workers for at least the next year or two as budget woes continue, the hiring burden will fall entirely on the private sector.
Private employers did add 64,000 workers last month, but that was a little less than consensus forecasts and far below what’s needed.
The U.S. needs to create 125,000-150,000 jobs each month just to absorb new workers and prevent unemployment from rising. So returning to the old peak employment a decade later would hardly suggest a healthy labor market.
The caveat, of course, is that this analysis assumes that job growth would remain at the same level for the next ten years, an assumption that may not be valid at all. Nonetheless, it does reveal quite starkly the depth of the jobs recession, and the extent to which we need to bounce back just to be at the employment level we were at when this all started. Anyone who thinks it’s going be quick and painless is fooling themselves.
And there is, of course, another possibility. It is entirely possible that we may never return to the days of 5.6% unemployment, at least not anytime in the foreseeable future. There seem to be very few options out there for the kind of massive growth in the private sector that is necessary to create the kind of permanent and stable jobs that people need. If that continues, we may be entering an era where structural unemployment in the United States is much higher than 5.6%, and the social, political, and economic consequences of that are incalculable
Welcome to the Brave New World.
Whatever happened, it probably sarted back when “jobless recovery was coined.”. I vote globalization, YMMV.
“The caveat, of course, is that this analysis assumes that job growth would remain at the same level for the next ten years, an assumption that may not be valid at all.”
Well, as the saying goes…..duh!
Has there ever been two years in a row with the exact same job growth levels, let alone 10? Has IBD never heard of business cycles?
Actually, I wouldn’t be surprised if they hadn’t, given the quality of their commentary on all manner of issues….
“It is entirely possible that we may never return to the days of 5.6% unemployment…”
And on what basis do you predict that, other than that you cannot imagine any sector of the economy experiencing rapid growth? And if that is the only basis for your prediction, then what is it in the history of this country that makes you feel that such pessimism is warranted?
IBD opeds are not to be taken too seriously. I’m relieved to see that even someone who believes $10 billion dollar infrastructure projects have no economic benefit is at least asking some intelligent questions about this baloney.
What explains the failure of both barrels of Keynesian macroeconomics to lift the economy?
The answer is to be found in the offshoring of production of goods and services for US markets (see “The US Economy Is On Death Row” ). Offshoring has disassociated Americans from the incomes associated with the production of the goods and services that they consume. Americans are now in the same position as people in third world countries whose consumption is based on goods and services from abroad. The difference is that third world countries receive World Bank loans to pay for their consumption, while the US pays by turning over its assets and the income streams associated with the assets to foreign creditors.
The phenomenon of offshoring has negated the stimulative measures of demand management. The postwar economic slumps, which the Federal Reserve engineered in order to cool an over-heating economy, left the productive base intact. The jobs were still there waiting on the Fed to reverse course and renew the growth in consumer demand. Offshoring, however, removes the jobs to China and India, and, thus, there are no jobs to which stimulative monetary and fiscal policies can call workers back.
In the current national and global economy, the only effects of demand management policies are to deprive retirees of interest income and to build up the national debt and, thereby, to make the debt a threat to the US dollar’s role as reserve currency.
Misplaced confidence in postwar economic policy and institutionalized optimistic forecasting have masked a dangerous social crisis. The real income of American households is less than it was a decade ago. Lawrence Katz, professor of economics at Harvard University, and a recognized authority on income studies, reports that median family income in 2009 is 5 percent lower than in 1999.
Moreover, the distribution of income in the United States has become polarized beyond anything politicians and economists had anticipated. Dollars have been shifted from the middle class to CEOs, shareholders, and Wall Street. The high value-added, high productivity jobs always associated with the US middle class have been offshored and the ladders of upward mobility that made America an opportunity society have been pulled down.
This development gives the United States another familiar third world characteristic – the disparity of income between a massive poor class and a small, concentrated rich class. On September 16, the US Census Bureau reported that 43.6 million Americans – including 20% of its children – citizens of the “world’s only superpower” – were living in poverty in 2009, the largest number since the Census Bureau began recording poverty a half century ago. The number of poor is higher this year, and it will be higher next year. Yet, bought-and-paid-for-economists still preach that offshoring is “good for America.”
The facts demonstrate that “globalism” is good for corporate CEOs’ bonuses and shareholders at the expense of the US economy and American workers. No amount of statistical maneuvering can get around this conclusion.
The massive loss of US jobs has increased the total of Americans without health insurance to 51 million, thus adding them on to the burden of remaining taxpayers. The “Obama health plan,” written by the private insurance companies, uses taxpayer funds to create 30 million new customers for private health insurance. Bought-and-paid-for-economists praised this sellout as a victory for “private medicine.”
Poverty is even worse than the statistics indicate. The real extent of the crisis is partly masked by children moving in with parents and grandchildren moving in with grandparents. On September 16, the Wall Street Journal quoted David Johnson, chief of the Housing and Household Economic Statistics Division of the US Census Bureau, saying: “If the poverty status of related subfamilies were determined by only their own income their poverty rate would be 44.2%.” Families sticking together and sharing one house has held down the poverty rate.
And still, Obama, Congress, the media, and the neocons think the US is a country that can afford multi-trillion dollar wars in places that most Americans cannot find on maps. While Washington continues its battle for world hegemony, the economy collapses at home. It is a policy with ominous precedents.
In his magisterial A History of Europe, Henri Pirenne describes the emergence of medieval Germany from the ruins of the Carolingian Empire of Charlemagne to become the leading power in Europe, only to throw away its prospects by neglecting its citizens in pursuit of foreign adventures. Such has been the mistake of the American state since the days of President George Herbert Walker Bush, if not before.
Twenty years of mistakes have reduced the American economy to ruin. But worse is almost certainly on its way, though the foreseeable last straw does not play much of a role in the simplified bread-and-butter economic news on which most Americans rely. America’s economic fate depends upon the fate of the dollar. With the dollar as the world’s reserve currency, America has been able to borrow at will to finance its large deficits. But that status is currently under threat.
America’s window of opportunity to save the dollar as reserve currency is closing down fast and the signs are not auspicious that the drastic moves needed to keep the window open will be taken. Deficit-building stimulus programs and low interest rates are a threat to the dollar’s reserve currency role and systematically reduce the dollar’s value. If these destructive policies are not reversed, the dollar will be irretrievably undermined.
When the dollar ceases to be the reserve currency, the United States will be relegated to the status of a second-rate power in need of international subsidies to pay for its imports.
by Paul Craig Roberts
Doug, know who Hal Lewis is? How come there is not one at OTB blogging on the fact a leader in the field of Physics has denounce global warming as a scam and those alarmists are driven by money? Another curious thing. Lou Dobbs did not hire illegals. This, in spite of an article with your by line on it stating he did. Do you search the internet for fantastic stories like this one in which you state unemployment will stay high till 2020? I predict once the conservatives regain control from those who would fundamentally transform us, the job market will improve. I understand there is an opening for President available in 2012. I think it will be a woman this time. A woman named Palin.
Yes, Zels, when President Palin eliminates all taxes on incomes over one million dollars, then hiring will pick up again and we’ll all be rich.
Too bad she won’t renew your unemployment, though. Maybe she’ll do what her ideological predecessor did and hire a bunch of thugs to dress in brown shirts and beat up those who don’t agree with her. I’m sure you would enjoy this work.
Do you know what an “outlier” is Zel? And why we don’t usually rely on them?
We may not be able to do a lot about world economic situations these days but there are some up close and personal situations that could certainly be tended to. At least one book has come out recently about economic gridlock, and if anyone can point me to other books or studies about this subject I would greatly appreciate it. (such as percentages of property and capital in the states put out of commission by gridlock) Perhaps more has not been done in this area because of the intersections between politics, economics and legal matters that it would require. Most gridlock gets ignored by state governors now supposedly because it is “private matters” – little do the governors realize the degree to which economies are ruined as a result..
RB, you probably know “The Tragedy of the Anti-Commons” which overlaps that a bit. Not as general as you are looking for.
BTW, I’d call smartphones our most recent tech cycle. Gridlock didn’t stop that, and it was good for a lot of jobs (think of all the phone storefronts), it just wasn’t enough to counter the broader declines.
I’ll go along with what Pete said above and here are some other reasons why we can’t stimulate the economy.
1. Banking and too much housing.
2. Jobs are gone and there are no jobs to go to.
3. You cannot create jobs if jobs are going overseas.
4. 2 billion cheap laborers will put pressure on the middle class and jobs.
5. The tax cuts was for the here and now and is spent money. The tax cuts do not have the stimulative effect that it had before.
6. We have had low interest rates for a long time, and the interest rates do not have the stimulative effect that it had before.
7. Supporting small business does not work in my town with factories closed down. You need traffic and employed people provided that traffic.
8. Putting tax cut money into the hands of the consumer does not have the effect that it once did, because half the products are made overseas.
9. What widgets can be built in America and not in China or some other country.
10. The 50 year old generation will have a tough time to retrain as companies replaced them with automation.
11. We have not invested in our country, in our people, and in the future.
12. We have seen ideology used by political parties to run the country and that is a failure. Again, you have to do what I said on number 11.
13. The politicians are controlled by interest groups and lobbyists and that leaves out the little guy.
14. Tons of mistakes through the years and the ignorance of what globalization/free trade is doing to our country.
15. There is no upward movement for the middle class, as we lost the jobs and the jobs that do exist pay lower wages and it is just one competitor against the other. There is no new industries to go to.
16. Companies have learned to have less employees through automation and lean management and lean principles. (one person doing the job of two or three people)
17. Big business getting tax credits which pushes out the little guy. For example, Wal Mart getting a tax credit to stay in the area for jobs and small business does not receive the same treatment.
Now is there a politician that will deal with the above? I think not.