What You Can Blame for This Insane Unemployment

Insane unemployment has remained a thorn in the side of our economy since the financial panic of 2007. Workers and businesses are hurting, it's election season, and conjectures and accusations are being tossed around left and right.

So what's actually to blame?
There are five main alleged culprits for our unemployment mess: unemployment insurance, tax and regulatory uncertainty, credit unavailability, labor skills mismatch, and demand.

The first two theories can be dispatched with fairly easily. My colleague Morgan Housel has already dealt with the notion that we can invert cause and effect and blame unemployment insurance by positing a sudden swelling of laziness: "The Federal Reserve Bank of San Francisco ... crunched the numbers and found that those receiving unemployment benefits only remain unemployed for a bit over a week longer than those who do not."

When you ask small businesses what the biggest problem they face today, just one in five names taxes, about the same proportion as in 2006. Similarly, the proportion of small businesses mostly concerned about regulation is lower today than it was in the 1990s when the economy was doing awesome.

Credit is somewhat drier than it was at the peak of the credit bubble, but not enough to account for 9.6% unemployment.

That leaves a skills mismatch -- the idea that a lot of unemployed aren't well-suited for jobs in other industries -- and the demand concern -- the idea that businesses are laying off workers because of sluggish sales.

Here's Morgan, arguing the skills mismatch perspective:

The financial crisis wasn't a short-term illness, but a symptom of deep structural problems, namely too many businesses that relied on debt and leverage. From carpenters at KB Homes (NYSE: KBH  ) and Pulte to mortgage bankers at Wells Fargo (NYSE: WFC  ) and Citigroup (NYSE: C  ) , millions of jobs revolved around a credit Ponzi scheme that's no longer viable. Plenty of these jobs are dead. They're not coming back. Ever. What we're going through is not a classic downturn as much as it is a reconfiguration of the economy -- and that takes a long time to complete.

"The economy" is almost perfectly bifurcated: one part is doing really well, and another is gasping for air.

This makes intuitive sense. At its peak in 2006, the market capitalization of the financial sector made up a ridiculous one-quarter of the value of the entire stock market. Refocusing from the crazy finance and housing bubble go-go days to a much saner economy built around making and doing more useful things is going to be painful for a lot of people.

But Mike Konczal disagrees. He notices that in just about every sector and occupation, underemployment is approximately double the 2000-2007 average, suggesting that the downturn is hitting workers across the board: "This is a story of aggregate demand, not a story of skills mismatch."

So which is it?
First, let's recognize that these theories aren't mutually exclusive. While full-time employment may be more difficult to come by across the economy, construction, leisure and hospitality, and many service jobs were particularly hard-hit. The job hunt will be especially difficult for people whose training and experience is limited to these areas.

But even if a skills mismatch can explain why specific individuals are having particular difficulty getting hired, it can't explain economywide high unemployment. For that, a demand shortage brought about by lost wealth, self-perpetuating unemployment, and timid consumer and capital spending is the only explanation.

All this is totally consistent with the aforementioned small-business survey that showed stable or declining concern about taxes and labor quality amid skyrocketing worries about demand:

Source: National Federation of Independent Business.

Source: National Federation of Independent Business.

There is, however, a sense in which "the economy is bifurcated." To see what's going on, let's take a look at corporate earnings growth. In a normal economy, we'd expect to see a shape vaguely resembling a graceful bell-curve with lots of companies showing small or moderate earnings growth or declines, with fewer names at the extremes showing spectacular fortune or blowups.

That's not how the picture looks today:

Source: Capital IQ, a division of Standard & Poor's. Pre-tax earnings exclude unusual items.

Source: Capital IQ, a division of Standard & Poor's. Pre-tax earnings exclude unusual items.

Who's hurting and who's thriving? A lot of the usual bubble suspects are in pain, while most S&P 500 companies in recession-resistant sectors are doing just fine.  

Sector

Median 3-Year Pre-Tax Earnings Change

Health care

35%

IT

23%

Telco

22%

Utilities

18%

Consumer Staples

17%

Materials

10%

Consumer Discount

6%

Industrials

(1%)

Energy

(15%)

Financials

(27%)

The bottom line isn't that a skills mismatch -- though it may exist -- is responsible for our unemployment woes; rather, many companies' earnings are divorced from the strength of our economy. In some cases, the profit increases are due to genuine recession resistances: Demand for necessities like health care is supposed to hold up well in tough economic times; Gilead (Nasdaq: GILD  ) (up 99%), which focuses on treatments for life-threatening diseases, is no exception. Corning (NYSE: GLW  ) (up 54%) derives a bulk of its sales growth from East Asian countries with lower unemployment. Businesses with sticky customers and recurring revenue such as Oracle (Nasdaq: ORCL  ) (up 48%) and Intuitive Surgical (Nasdaq: ISRG  ) (up 229%) can hang onto sales even when sales in the rest of the economy are tenuous.

But, on the whole, persistent unemployment is terrible for workers and sales. Last time, our economy was ultimately bailed out by a massive economic stimulus in the form of World War II -- not tax cuts, deregulation, small-business lending, or jobs training. If we continue to blame unemployment on the wrong culprits, we could see the economy muddling along for some time.

Agree, disagree? Let me hear it in the comments box below.

Ilan Moscovitz doesn't own shares of any company mentioned. Intuitive Surgical is a Motley Fool Rule Breakers pick. The Fool owns shares of Oracle. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 01, 2010, at 4:23 PM, TMFHousel wrote:

    Nice article Ilan. Here's Clinton's take on the matter, which offers a few more data points: http://www.fool.com/investing/general/2010/09/21/bill-clinto...

  • Report this Comment On October 01, 2010, at 4:33 PM, DDHv wrote:

    After my first layoff, we made sure there was work for myself always available: backyard gardening, food storage, repair and renovation, study & research, and whatever else we could think up. Too bad neither of us knew how to use a sewing machine!

    If you stay out of debt, there are many ways to do things for yourself when laid off. We really need food, etc., not cash as such.

  • Report this Comment On October 01, 2010, at 4:36 PM, TMFDiogenes wrote:

    stockmarket,

    Credit unavailability is when would-be borrowers are unable to get credit. Even though interest rates are low right now, there are reports that some businesses are having difficulty getting loans.

    Morgan,

    Yeah, that was a nice article. I meant to link to it and make the point that it's not necessarily a bad idea to train people in emerging technologies (there's a huge supply of unemployed workers and a huge need for alternative energy, for one), but it would have been slightly tangential.

    Ilan

  • Report this Comment On October 01, 2010, at 4:39 PM, Glycomix wrote:

    Why work when you're paid not to? For two years people have been paid not to work. If they go to work, they could lose their security. A person who runs a private employment agency said that he has often been embarrassed when people turned down job offers in line with their former pay histories; They wanted more. When I asked why he had so much work in line, a local auto-body repair shop owner said "Can't get good workers back, unemployment pays as much." One employer told me that he won't hire people because he can't afford to.

    - The total adjusted gross income for everyone in the US is $8 trillion and the tax revenue is $1 trillion. The deficit for the past two years is $3 trillion. To pay for OBama's "stimulus programs" that increase unemployment by 20% in the same amount of time we'll have to increase taxes to 300% their current level just to pay for OBama's stimulus. God save us from another stimulus!

    $1.5 trillion debt-yr + $1 trillion normal expenditures-yr/ $1 trillion revenue-yr = 250% of income. We'd probably have to increase taxes 50% to deal with interest and administration costs. Consequence = tax level of 300%.

  • Report this Comment On October 01, 2010, at 5:06 PM, Stonewashed wrote:

    My, my, my. Sometimes I wonder if you guys at TMF just sit around and write fairy tales for your amusement and throw in a few graphs to make it look credible.

    The economy is where it is because politicians and Wall Street are still playing the same old games with everyone else's money while they vacation on the Riviera talking about how much longer they think they can grab everyone by the short hairs.

    Perhaps if they began paying their bills instead of pretending to be banks while they horde other people's money.

  • Report this Comment On October 01, 2010, at 5:14 PM, TMFDiogenes wrote:

    Glycomix,

    I enjoy good hyperbole as much as the next guy, but are you sure that math works?

    I mean, unemployment is 9.6% -- so the stimulus programs couldn't have increased it by 20%, unless it was -11.4% before he took office.

    Most of the deficit increase is not due to increased spending, but due to lost tax revenue as a result of unemployment and tax cuts:

    http://www.fool.com/investing/general/2010/07/19/this-is-kil...

    Again, Morgan's article kindof obliterates the notion that unemployment is caused by unemployment insurance:

    http://www.fool.com/investing/general/2010/08/31/the-popular...

    Fool On!

    Ilan

  • Report this Comment On October 01, 2010, at 5:28 PM, Maple6239 wrote:

    How much of the unemployment is due to under-education - failing to complete college or even high-school?

    I do not know the answer, but I venture it is significant.

    In the U S, the cultural bias against education is killing us.

  • Report this Comment On October 01, 2010, at 5:29 PM, CajunRon50 wrote:

    So the fact that manufacturing jobs are moving more and more overseas for various reasons isn't part of it? The fact that more and more illegal immigrants are taking up jobs isn't part of it? Seems to me we just need to take our collective heads out of the sand, look around and DO something about it instead of just arguing with each other and talk talk talk talk talk talk talk

  • Report this Comment On October 01, 2010, at 6:15 PM, whitemice wrote:

    Unemployment and underemployment are the bane of our society. It is apparent that there are many people who want jobs and careers who are unable to find suitable employment as a result of the poor economy. Employability is not a function of education and experience as it has been in the past. There are literally hundreds of thousands of people with advanced college degrees who are working at menial jobs or unemployed. There must be statistics collected somewhere about the number of MBA's, CPA's, Phd's, etc. who have looked but not found suitable employment. Even government jobs are on the chopping block big time. The gloom and doom in the job market is palpable. One certainly hopes that it does not take another WW 11 to pull us out of the doldrums. But it is obvious that digging the debt hole deeper is not the solution.

  • Report this Comment On October 01, 2010, at 6:19 PM, bluebare wrote:

    What You Can Blame for This Insane Unemployment?

    Um, we replaced people with machines, exported what people jobs remained to countries with cheap foreign labor, and we're not innovating fast enough to fill the unemployment gap anymore ?

  • Report this Comment On October 01, 2010, at 6:30 PM, Borbality wrote:

    I can't be the only one who thinks it's all simply debt-related, can I? It's not like the housing crisis happened separately from this unemployment situation. People's equity dried up, now they're not buying crap they didn't need and couldn't afford anyway, and now those companies that produce said crap are not hiring.

    I'm an amateur but it seems pretty simple to me. And that's why it will be such a hard problem to fix. And that's why the only real solution seems to be to print more money and give money to people to spend on crap they don't really need. What a world! Getting credit isn't the problem. The problem is paying off the debt you have. Local governments are hurting because of all their bad debt deals. The strong and healthy companies are still doing well but can't hire so many people anymore.

  • Report this Comment On October 01, 2010, at 6:55 PM, lctycoon wrote:

    I have a hard time completely buying any analysis about unemployment causes that doesn't include the government mandated 40% hike in pay for the lowest income earners (these people have by far the highest unemployment rate), the massive cost of providing healthcare to all employees, and the roughly $10,000 in compliance costs per employee that small businesses incur due to government regulations. Any first-year student of economics will tell you that when the cost of something increases, then you'll demand and use less of it - that includes human capital.

    Demand absolutely plays a role and may even be the greatest cause. But it's far from being the only one.

  • Report this Comment On October 01, 2010, at 6:56 PM, PSU69 wrote:

    My Authorized Representative in Barcelona says unemployment in Spain is 22 to 26%. The USA remains well ahead of many global economies. We are darn lucky our unemployment is as low as it is. The GLOBAL games of over building, home/hotel/condo flipping, excessive debts, and spiraling social costs (guests who are NOT going away but still need medical care)...all continue to prevent recovery. Especially with the games in DC, we are lucky to be in the USA.

  • Report this Comment On October 01, 2010, at 7:10 PM, Midas5280 wrote:

    I don't buy the skills mismatch argument. Qwest iis laying off by the droves. In one group, several people have degrees from MIT! If education from MIT isn't good enough for American corporations, then what is? It's greed played out over and over. I have several degrees and am always continuing my education. I'm a bit worn out on hearing how the U.S. can't produce the skills and education to meet the needs of business. Face it, if you can convince our less-than-ethical Congress to allow more H1B visas and acquire talent at a cheap cost, that's what corporations are going to do. What goes around will come back around. When people cannot afford to buy the goods your company makes, sales plunge, and the layoffs start--again!

  • Report this Comment On October 01, 2010, at 7:34 PM, jm7700229 wrote:

    It's interesting to read some thoughtful comments and ideas, and also the bigoted cynics who believe it's all about conspiracy and illegal immigration.

    I'm with Borbality; the first two forclosures in my neighborhood were homes on which the owners owed more than $100,000 more than they had paid for their homes. Much of the boom was fueled by people cashing out their equity and spending the money blindly, acquiring new debt without any added value. Now that that source of money is gone, the consumption that it generated has stopped; hence, reduced economic activity.

    BTW, as an executive of an association of more than 1,800 companies, I have never heard anyone say that he or she wanted to "export jobs," or "ship jobs overseas." It's done for competitive reasons. When Honda can pay workers in its Chinese transmission factory a monthly wage that is equivalent to a day's wages in the US, how can we not move production overseas?

    And if I hear one more person get out of his Toyota and complain about greedy capitalists outsourcing manufacturing jobs, I'm going to hit him over the head with my Toshiba computer.

  • Report this Comment On October 01, 2010, at 8:13 PM, TMFBritcodeftw wrote:

    To the commenter who wrote "Why work when you're paid not to? For two years people have been paid not to work. If they go to work, they could lose their security." - I was laid off in 2008 due to cutbacks and you know how much I would have received from the MI govt (if I had not walked right into a new job)? $362 a week. As a father and husband I couldn't possibly have made that work. What a joke. I just want to give some perspective to the situation - whatever the reason for high unemployment it is certainly not because the majority of unemployed are enjoying the good life!

  • Report this Comment On October 01, 2010, at 8:53 PM, pkluck wrote:

    "Morgan's article kindof obliterates the notion that unemployment is caused by unemployment insurance" I reread his article and IMO his arguments are weak. I decent portion (10%,30% 50% I don't know) of people collecting unemployment are perfectly happy to stay unemployed until their benefits run out. They scale back, live at home, live with a girlfriend, live with friends, live with a spouse, make tax free cash on the side etc. etc. I know of several construction workers who currently collect unemployment and do cash jobs on the side, tax free and are doing quite nicely with no intention of getting a job. I also know another gentleman who is 62 and was thrilled to get laid off, two years of benes then retirement, we all know people who are scamming the system. Do some people need unemployment, absolutely but maybe we limit it to 3 months and if you still need help you go on welfare and food stamps not 2 years of unemployment.

  • Report this Comment On October 01, 2010, at 9:53 PM, tricktrack wrote:

    Once again, we get the same old argument of people are being paid not to work so that's why the unemployment rate is so high. pkluck, may I suggest if you're going to make that argument, you back it up with actual facts and statistics. A number that might be 10 or 50 percent or anywhere in between carries no credibility at all.

    Glycomix, I know of no state that pays the same for unemployment that a worker got when employed. So when your auto-body shop friend says that unemployment pays as much as he does, either he is full of it, or he's offering substandard wage for the job.

    I don't doubt that there are people gaming the system, Name a system that someone hasn't figured out a way to take advantage. Not to excuse what they're doing, but I also know of people collecting a nice salary and handsome benefit package who spend a sizable part of their work day on Facebook or managing their fantasy football teams. Should everyone with a job be judged by their behavior?

  • Report this Comment On October 01, 2010, at 9:53 PM, JavaChipFool wrote:

    I see a lot of side/snide references to undocumented workers as one of our problems.

    Most of them use fake SSN's, from which unemployment and income taxes are taken out, that go to the treasury, and they never see any of that again. Do you ever figure those numbers into your "They take from the system but never give back" calculations?

    How about the cheap food you buy at the grocery store? Who do you think packs those chickens and fish?

    Its not a simple problem, and I don't think a sound bite is going to have a solution to it.

    Not to get too far off topic, but cutting off the flow of people to this country who are adventurous enough to leave home to try and make a better life for themselves will in the long run turn us into hidebound stuck in the muds with no innovative characteristics. Was anti immigrant fever at this high a pitch when quotas were instigated in the early 1900's?

  • Report this Comment On October 01, 2010, at 10:49 PM, BillyTG wrote:

    I think you're WAY off the mark.

    In answer to your question, the blame for unemployment is NAFTA, CAFTA, GATT, and bi-lateral free trade agreements with Chile, China, and others.

    These agreements were great for corporations to send American jobs to underpaid foreigners. One only has to look at the growing trade deficit since NAFTA was signed in the early 1990s, to see the effect this loss of US production has had on our economy. Curiously, the national debt has a high correlation to the trade deficit: http://www.tradereform.org/2010/08/trade-deficit%E2%80%99s-r...

    Free trade is great, but the legislation was incredibly poor in NAFTA, GATT, CAFTA, and all the rest, and greatly favored corporations at the expense of the working class: http://www.thirdworldtraveler.com/Chomsky/ChomOdon_FreeTrade...

    This has nothing to do with education and skills mismatch or unemployment insurance...it's like you're so focused on the obvious SYMPTOMS that you don't see the underlying problems. The way our politicians are trying to fix their screwup is by devaluing the dollar to the point where the underpaid workers are American. So instead of paying Mexicans or Indonesians $8/day in horrible conditions, we'll bring the inexpensive labor costs back home. It's a total double whammy---first American jobs get exported for cheaper employees, then those jobs get imported again where the cheapest workers will be waiting in line for paychecks. Who benefits? CORPORATIONS. Who loses? Working people. This should explain your profit numbers.

    Hey, at least we'll get our jobs back, crappier than ever, increasing further the gap between rich and poor.

    The correlations here are so obvious!

    "Free trade" agreements mean corporations EXPORT US jobs to cheaper laborers. Exported jobs means the US has higher unemployed, less production, and a growing trade deficit. Our idiot politicians have been abusing the power of the dollar for years, racking up TRILLIONS in debt, and it has finally reached the point of no return and snowballing economic disaster. In fixing it, politicians are now racing to devalue the dollar to bring jobs back home and lessen the trade deficit.

    Who has benefited this entire time? CORPORATIONS. Whose quality of life and working conditions have deteriorated this entire time? LABORERS.

  • Report this Comment On October 01, 2010, at 11:52 PM, Lokke wrote:

    Notice when someone suggests that the uncontrolled flood of cheap labor into the country, aka illegal immigration, MIGHT have something to do with the unemployment rate of American citizens, he is immediately labeled a "bigoted cynic" by people like jm7700229? Analysis by name calling is brilliant, jm .... thanks! I guess you'll have to call my foreign born wife, who entered this country LEGALLY, a "bigot" too, since she agrees with me that when you increase the supply of labor in a period of lower demand, you MAY have excess labor. But hey, thats just us bigots talking.

    Or, you could subscribe to the thoughtful analysis of JavaChipFool, who says that he sees "side/snide references to undocumented workers" ..... is that politically correct speak for illegal immigrants?? Just checking. Anyway, he says we all benefit from the labor of illegal immigrants because they provide us with cheap food by packing chicken and fish! We're talking about American unemployment, and he's telling us how lucky we are that illegal immigrants will work more cheaply than American citizens. No jobs lost there, huh JavaChip!

    Illegal immigration is NOT the SOLE reason for high US unemployment, but to deny that it is a contributing factor is intellectually dishonest.

  • Report this Comment On October 02, 2010, at 1:15 AM, BillyTG wrote:

    Lokke, I agree with a lot of what you wrote. Too many Americans are trying to find places to vent their frustrations with the economy, government, and their own lives. Thanks to our corporate-controlled mainstream media, the real perpetrators are deflecting emotional blame to:

    -Illegal immigrants

    -Democrats

    -Republicans

    -China

    -Mexico

    -Obama

    -Bush

    -Clinton

    -Unemployment Insurance

    -"Labor skills mismatch"

    These are all small contributors...but the disastrous foundation underlying all these things is the fact that

  • Report this Comment On October 02, 2010, at 1:17 AM, BillyTG wrote:

    our government is controlled by corporations. The longterm goals of corporations and government are controlled by the Council of Foreign Relations and Trilateral Commission. Please everyone do your homework. Stop buying into the bullcrap spewed on CNN and Fox, and learn about the corporate oligarchy in which we live.

  • Report this Comment On October 02, 2010, at 5:54 AM, CajunRon50 wrote:

    jm7700229, how in the world is opposing illegal immigration bigotry? I welcome with open arms all LEGAL immigrants regardless of country of origin, race or religion so how dare you call me bigoted? Seems me this is a poor attempt at trying to make opposition to illegal immigration "politically incorrect".

    How many ILLEGAL immigrants do YOU suggest we absorb into our economy and social welfare programs paid for by tax paying citizens of the United States? How may American jobs do YOU suggest we "give away". Surely you have a number in mind at which you yourself will begin to oppose illegal immigration...surely!

  • Report this Comment On October 02, 2010, at 7:57 AM, skypilot2005 wrote:

    Ilan, I disagree with your dismissal of regulation as contributor to unemployment. I am surprised you didn’t mention the real or perceived future cost of National Health Insurance (some call it Obama Care), specifically. I think this is adding to the number of unemployed.

    You state, “Similarly, the proportion of small businesses mostly concerned about regulation is lower today than it was in the 1990s when the economy was doing awesome”. What is your source for this? Is this after the passage of National Health Insurance ? I would place National Health Insurance in the category of regulation.

    Small businesses employ millions of workers and I don’t think it is clear what this is going to cost each small business owner. Without knowing this, I think a lot are putting off hiring until it is absolutely necessary.

    Business owners are very busy running their businesses. They need to have

    a source they can go to to find out what, if anything, this is going to cost them for each employee hired.

    Some may then start hiring, again.

    Many people start their careers at small employers to gain skills and experience before being hired by large corporations. So, it is a domino effect.

  • Report this Comment On October 02, 2010, at 10:28 AM, lctycoon wrote:

    skypilot2005, I'd also like to know the source of the claim about regulation is not a concern. I am always communicating extensively with fellow entrepreneurs and all are saying one of two things - "Regulation" or "IRS invasions."

  • Report this Comment On October 02, 2010, at 11:22 AM, TMFDiogenes wrote:

    The source for “Similarly, the proportion of small businesses mostly concerned about regulation is lower today than it was in the 1990s when the economy was doing awesome” is the most recent NFIB survey. Concern about regulation is certainly on the rise, but it's still lower than the 90s, so it can't be the primary explanation for whopping unemployment in excess of the 1990s. Notice too in that same survey question graph that concerns about "insurance" are way, way down (I don't know which category small businesses owners would place health insurance reform would under.)

    Page 20:

    http://www.nfib.com/Portals/0/PDF/sbet/sbet201009.pdf

    Thanks for reading and posting, everyone -- this is a fascinating discussion.

    Fool On!

    Ilan

  • Report this Comment On October 02, 2010, at 12:18 PM, BillyTG wrote:

    http://caps.fool.com/Blogs/reasons-for-us-unemployment/45445...

    My blog about it, where I get challenged by a fellow Fool, and acknowledge that "free trade agreements" are not necessarily the sole culprits, but rather our entire corporate-controlled-"democracy"-profit-at-all-costs-oligarchy. NAFTA/CAFTA/GATT are a big part of that mentality.

  • Report this Comment On October 02, 2010, at 1:32 PM, PoundMutt wrote:

    According to the Small Business Administration a "small business" is one employing less than 500.

    Does anyone know the numbers of businesses with 1-5 employees, 5-25, 25-100, ...?

    So, BillyTG, your solution is WHAT? Socialism?Communism? Beaurocrats in Washington DC telling you how to run your business in Washington State? OH, WE ALREADY HAVE THAT!!!

  • Report this Comment On October 02, 2010, at 1:50 PM, BillyTG wrote:

    @PoundMutt,

    Communism? My friend, I'm as capitalist as they come. I'm also pro-freedom, pro-democracy.

    Socialism? We're kinda there.

    What we have is an oligarchy, a corporatocracy. It's a top-down system that has nothing to do with democracy. Anyone who thinks his vote matters is fantasizing. Our two major parties are cut from the same cloth: http://www.youtube.com/watch?v=mk8pxyAWTBk

    And actually, now that you mention it, China is more capitalist than the US in many ways.

    Bureaucrats? I agree completely with you on this point! All are corporate-funded shills!

    Be careful where you get your information. Look who's paying for that information. Then consider that the information that has been fed to you your entire life might be wrong. This is an impossible exercise for most people. Maybe you are different.

  • Report this Comment On October 02, 2010, at 2:26 PM, TMFDiogenes wrote:

    Billy, if the crux of your argument is that you're pro-free trade but think the particular trade agreements we have are bad for workers, can you share a source or something explaining in what non-free trade ways they are detrimental to workers?

    "What we have is an oligarchy, a corporatocracy", whether right or wrong, could be more persuasive with supporting arguments/examples for exactly how you think this oligarchy is hurting workers.

    Thanks,

    Ilan

  • Report this Comment On October 02, 2010, at 4:15 PM, BillyTG wrote:

    Ilan, I'll put a link here, and I also replied to you on my blog (a much more extensive reply that I don't want to copy and paste here, taking up even more bandwidth): http://www.scribd.com/doc/20229666/Noam-Chomsky-The-Prospero...

    Relevant pages are the first handful, then 11-13.

    Thanks for such an interesting topic. Your own words from the article have profound implications that many people aren't seeing:

    "many companies' earnings are divorced from the strength of our economy." We need to ask ourselves why this is the case. One answer might be export of labor and production due to corporate-friendly trade agreements. Another answer might be the decreased wages and benefits to Americans, a result of those same trade agreements.

  • Report this Comment On October 02, 2010, at 4:21 PM, skypilot2005 wrote:

    Ilan,

    Thanks, for providing the reference. I didn’t read the entire report. I use my free time on weekends to research stocks. :)

    The data was compiled August 2010, according to page 20.

    I wonder if they specifically asked about the perceived future cost to employers of mandatory national health insurance? Further more if, this was having an affect on their hiring decisions? I am very surprised if, the NFIB didn’t. The law was signed in March. Its’ merits are still being hotly debated.

    I work for a marketing unit of government and I am in face to face contact with business owners everyday. I assure you this is a major concern of the majority of owners I have talked to. Conservatively, I’d say 90% of them are against mandatory health insurance. This maybe because they perceive it will hurt the bottom line or they may be misinformed. It’s hard to know because each business operates in different circumstances. I think it is a reasonable concern.

    I just wanted to point out a concern that I know the majority of small business owners have. It is a concern that many will need resolved before they add employees. I can understand where it is the prudent thing for them to do, at this point.

  • Report this Comment On October 03, 2010, at 1:12 AM, Glycomix wrote:

    In their article Valetta and Kung reported “the availability and value of Unemployment Insurance Benefits can lengthen unemployment spells. Empirical estimates using data from the United States and other countries confirm this general relationship.” Using a survey by the census department, they found “the increase in expected duration was similar for job losers, the group that is eligible for UI benefits, and leavers and entrants, who are ineligible.” The people who were ineligible for unemployment insurance got jobs only 1.5 weeks faster than those who weren’t eligible.

    http://www.frbsf.org/publications/economics/letter/2010/el20...

    Two pieces of information are missing from Valetta’s data: (1) how many of the “eligible” workers were receiving unemployment benefits, and (2) whether people who are fired for being incompetent or insubordinate (and therefore ineligible for employment insurance) usually have a more difficult time getting a job than more interpersonally skilled “eligible” people? Their finding in the survey that the “ineligible” worker found work 1.6 weeks faster than the “eligible” worker. Interpersonally and intellectually competent “eligible” workers would logically be significantly faster to be employed than the interpersonally incompetent “ineligible workers.”

    The different interpersonal and intellectual skill levels among the “eligible” and “ineligible” workers makes them uncomparable in “how long they were unemployed”. Valetta and Kung should follow up the “eligible” workers in the survey to determine which ones had applied for and received unemployment insurance and which had not. With this data, they could compare how long it took eligible workers to become employed because these two groups differ on only one dimension: applying for and receiving unemployment compensation.

    At present, I have to agree with Valletta and Kung’s statement, “the availability and value of Unemployment Insurance Benefits can lengthen unemployment spells.”

  • Report this Comment On October 03, 2010, at 9:03 AM, Nickjjg20 wrote:

    Great article straight and to the point.

    thank you

  • Report this Comment On October 03, 2010, at 10:32 AM, rxt215 wrote:

    Having lost my job of 26plus years to CAFTA. (I was forced into retirement so my headcount did not count on job loss.) The economic effects of millions of US jobs lost to NAFTA, CAFTA & China came home to rest! This has been and continues to be a Corporate and Government initiative. Now, the US standard of living will continue to decline until we reach these free trade country economies...wait until SAFTA hits!!

  • Report this Comment On October 03, 2010, at 11:15 AM, rfaramir wrote:

    The problem is we don't have a free market.

    It is illegal to hire someone below a government mandated minimum wage, so some go unemployed. Taxes take a huge proportion of income, so fewer jobs are profitable to create than will low (or no) taxes.

    We are in a bust, due to a fractional reserve created credit boom. We have structural problems to liquidate. If it were allowed to happen, it could be done quickly, but government won't allow it. It props up zombie companies, so they can continue to destroy wealth. It tries to reinflate the bubble, worsening the situation.

    We got here by creating too much debt, and we're trying to get out by creating more?

  • Report this Comment On October 03, 2010, at 12:09 PM, exeter17 wrote:

    Here in NY we have a lot of people pulling down $435 a week on the dole. That's more than the $10.00 an hour we offer for semiskilled labors. It my opinion that ever at the $15.00 an hour level won't compete with the dole once you account commuting and other work related costs into the mix.

  • Report this Comment On October 03, 2010, at 1:30 PM, GameSmoke wrote:

    The people saying credit is not the problem are either talking about personal credit or have never tried to get a business loan in this environment. Go try to get a line of credit and see what happens. The banks will tell you 'honestly we are not interested in doing new loans --- anything that is even close to something that might cause us a problem with regulators now or with upcoming changes that we don't yet understand --- we don't went to take the chance.'. I've seen companies with 700k of receivables on an ongoing basis and a solid track record of collections over 5+ years simply unable to get a loan. Absurdly enough some banks will loan you 100k if you deposit 100k. Obama keeps talking small biz loans but I can tell you from first hand experience --- it ain't happening.

    No loans, no new startups or expansions, no new jobs ... Rinse and repeat. That is where we are at today.

  • Report this Comment On October 03, 2010, at 2:16 PM, BillyTG wrote:

    @GameSmoke,

    read some of alstry's blogs. He talks a lot about credit and how everyone---but the very wealthy, and major financial institutions and politicians---is being denied credit. Basically, the rich are still making money while 90% of people are losing.

  • Report this Comment On October 04, 2010, at 9:01 AM, kram789 wrote:

    I have been unemployed before, and I can tell you from personal experience that unemployment compensation does even come close to salary. Like many professionals, I eventually took a job that paid less than I was making before (that new lower paying job was still multiple times more than unemployment). The culprit is demand and what is driving decrease in demand is the erosion of income and the reliance on debt. More simply said, as people have lost income to inflation they relied on debt to keep their life style. Now that debt is tapped out they have nothing to spend. As this debt is paid back or relieved; and the housing market returns to gain in equity; then demand will increase. What we need to prevent the next crisis is education in how to manage personal finances. Rule number 1, is live below your means. That allows you to avoid debt, increase savings and results in a steady growth versus the roller coaster we are on now.

  • Report this Comment On October 04, 2010, at 10:45 AM, Brent2223 wrote:

    I think Morgan nailed it, "Plenty of these jobs are dead. They're not coming back. Ever. What we're going through is not a classic downturn as much as it is a reconfiguration of the economy -- and that takes a long time to complete." The Financial Services industry produces very little value for the overall economy and North America needs to stop looking to this industry as a viable method of growing the economy.

  • Report this Comment On October 04, 2010, at 2:14 PM, lctycoon wrote:

    Buyaluminum - The USA has more oil in the ground than any OPEC country except Saudi Arabia and has enough to go for at least 50 years at current consumption rates. The USA has more coal than any nation on Earth. It also has substantial amounts of natural gas in the ground. It's not an issue of energy supply - most of that is off limits due to Congressional mandate.

    At the moment, no energy source except for nuclear can handle consumption in this country.

    We either need to get consumption down or develop a new fuel source that is as economical as fossil fuels and is renewable. Wind, solar, etc. can't do it.

  • Report this Comment On October 04, 2010, at 2:15 PM, lctycoon wrote:

    I meant to say - no non-fossil fuel energy source except for nuclear power can handle consumption in this country.

  • Report this Comment On October 04, 2010, at 9:40 PM, theHedgehog wrote:

    If it were a simple skills mismatch, then wages would be skyrocketing where there is a shortage of skills; much like in the 80s. Do we see that? No.

  • Report this Comment On October 04, 2010, at 9:50 PM, Varchild2008 wrote:

    Unemployment insurance may not CAUSE unemployment to occur....

    But what it does is prolonge the length of individuals staying unemployed due to not finding a job that pays at least equal to what unemployment checks provide.

    Believe me... I've heard enough people tell me that they have to be concerned about landing a job cause their unemployment checks will go away.

  • Report this Comment On October 05, 2010, at 11:19 AM, mrwizard555 wrote:

    it's the deleveraging. consumers that have jobs are paying down their debts. those that don't are defaulting on loans, which makes them go away. corporations are doing it too. remember the haircut GM bondholders took?

    our economy was adapted to having all that extra money zooming around. now a big chunk is gone.something else has to go away too.

    there is not a business in the country that would pass up a chance to spend an extra buck to net an extra dime. no way they will spend it on a job and get nothing for it other than a warm, fuzzy feeling.

  • Report this Comment On October 05, 2010, at 11:51 AM, THEMATHISNEAR wrote:

    Ilan/TMFDiogenes,

    Glycomix' math works. If you stipulate that the unemployment rate was 8%, and it increased to 9.6%, the rate has increased 20%. My read of his comment was that he was talking about a 20% increase in the rate, not an increase of 20 percentage points.

    I do find it interesting that we needed the stimulus to keep the unemployment rate from going up. It went up anyway, but Obama got the chance to give 2/3 of a veritable boatload of money to Democratic districts. There was a plan here, alright. What's Rahm's favorite saying? "Never waste a crisis."

  • Report this Comment On October 05, 2010, at 2:02 PM, creditexpert wrote:

    I believe any labor-skills mismatch is an overrated aspect of current unemployment issues. I just graduated from college with a degree in journalism and, despite the struggles of traditional print media, have managed to find a job simply because the skills I have acquired match the needs of employers. Similarly, friends of mine from school with finance, engineering, communications, environmental science and geography degrees have all obtained employment as well.

  • Report this Comment On October 05, 2010, at 3:24 PM, guiron wrote:

    "What we need to prevent the next crisis is education in how to manage personal finances."

    That's all well and good, but that won't actually prevent anything from happening on a large scale. The problem originates with the broker and lender. With no due diligence and a lax regulatory environment, the people who stand to make money will take every opportunity. The borrower can't borrow with no documentation at ridiculous terms if the bank isn't lending to just anyone, and if the banks can get away with it and pass it along like a hot potato, they will. Borrowers certainly don't have the banks over a barrel.

  • Report this Comment On October 05, 2010, at 3:31 PM, guiron wrote:

    "But what it does is prolonge the length of individuals staying unemployed due to not finding a job that pays at least equal to what unemployment checks provide."

    If it does that to some degree, that is a small price to pay for the humanitarian goal it achieves. Not everything we do as a society revolves around pure profit. There is a cost to allowing people to suffer as well, with much deeper and more pervasive effects. Poverty begets a myriad of problems which affect all of us.

  • Report this Comment On October 05, 2010, at 10:08 PM, mythshakr wrote:

    People who claim people prolong unemployment because of unemployment benefits have obviously never been on unemployment and had any significant long term financial responsibilities, such as a mortgage. I have little doubt that some 20 or maybe 30 something folks who have not "settled down" yet are guilty as charged. I would also say there are other enablers likely involved in these situations.

    It does seem to me from my observations that these younger folks seem to think that because their education and experience has been in X,Y or Z that that is their only direction. I have heard such things as "everything has been towards X and I'm not going to waste that on Y or Z". The world just doesn't work like that. Just because you're an X doesn't mean the working world has a place for everyone that wants to be an X, now or in the future. Get over it. I would bet that less than 50% of people over 40 are working in the primary area of their early years education and experience.

  • Report this Comment On October 06, 2010, at 12:02 AM, MyDonkey wrote:

    You strive for centuries to replace human labor with machines, and when it finally happens, you complain of unemployment! You Homo sapiens are Priceless!

    Your heavy equipment overlords are havin fun playin human bumper-cars while the rest of you brainiacs are fightin over the privilege of pickin up nickels in front of a bulldozer! How sapient is that? There's obviously not enough non-automatable work available to keep all of you busy at full-time jobs, but your smooth-talkin owners say the solution is to increase the age of retirement!

    Here on Faira Terma, we NoMoWoes get all our work done when we go to the toilet, leavin our spare time free for occasionally supervisin the robots that make robots, and for entertainment such as The Runnin of the Donkeys and watchin you clowns tear yourselves apart. Don't stop now. Just keep on doin what you're doin -- you Humans are Rich!

  • Report this Comment On October 06, 2010, at 5:05 PM, baskins wrote:

    CajunRon,

    I agree with you about jobs moving overseas, however I disagree that illegal immigrants taking our jobs. Sure there is a problem with illegal immigration but most of the jobs they are taking are the ones that no one here is willing to take. Much like Glycomix said, people are getting paid better not to take them and remain on unemployment. Or they are just more labor intensive than people are willing to put up with. I could be wrong on this, but aren't illegal immigrants mostly taking under the table jobs anyway? How can someone who is not a legal citizen possible get a job working for a corporation? And like TMFDiogenes mentioned, we should be leading the field when it comes to innovation in emerging technologies and putting people back to work with the jobs that this would create. Train and educate people to work within these areas, regardless of previous skill set or education.

  • Report this Comment On October 07, 2010, at 6:09 PM, Glycomix wrote:

    RE: SanFrancisco Fed Study.

    Something smells in San Francisco and it's not just the wharves: Valletta and Kuang's just-in-time for elections 15 April 2010 "San Francisco Fed paper" has problems in both logic and evidence. Valletta and Kuang's logic claims that two years of unemployment payments couldn't have caused record lengths of unemployment. Competent employees who were laid off took only 1.6 weeks longer to find a job than those who were fired! In what parallel universe does this make sense?

    Valletta and Kuang said that the "eligible for unemployment payments" laid-off (competent) employees took only 18.6 weeks to find employment compared to the 17.1 weeks for "ineligible for payments" (incompetent) employees who were fired or quit. Logic compels me to ask, "Wouldn't the competent employee typically find a job in half the time that the incompetent employee who was fired? Their former employer would want skilled, productive employees back as soon as possible. If they didn't have enough work for them, their former boss would give a good reference to any employer to whom they applied.

    If this logic is valid, how would it affect the time it takes the competent employee to get a job? Competent workers without unemployment insurance would find work in 8.5 weeks (50% of 17.1 weeks), compared to the 18.6 weeks to they take when they’re given unemployment payments with health-insurance attached. That's a 10 week, 218% increase in the length of time that extending unemployment payments cause the ‘eligible unemployed’ to find a job. (The calculation for the “Percent increase in time to find a job” =18.6 wk/8.5wk x 100) Does extending unemployment insurance increase the length of unemployment and decrease American productivity? What is your conclusion?

    Read Valletta and Kuang's "evidence" and see if I've misquoted them: "the expected duration of unemployment had risen about 18.7 weeks for job losers and about 17.1 weeks for leavers and entrants [fired employees], using the years 2006-2007 as a baseline. The differential increase of 1.6 weeks for job losers is the presumed impact of extended UI benefits on unemployment duration."

    http://www.frbsf.org/publications/economics/letter/2010/el20...

    The problem with Valletta and Kuang's evidence is that didn't prove or disprove anything. They used the "Current Population Survey" (CPS), an opinion survey that doesn’t give us any direct data on unemployment insurance applicants. It isn't possible to tell which "eligible worker" applied for unemployment insurance and which didn't, or how long they were on unemployment insurance. No assumptions can be proven or disproven by their data.

    If they wished to determine the effect of being paid to avoid work, they should have compared apples with apples. Use the CPS to identify workers who were eligible for Unemployment insurance. By linking this data with the unemployment insurance payment rolls, an investigator can discover who received unemployment insurance and who didn’t. Now that you can tell which of the eligible employees received unemployment payments, cross-check this with the employment tax rolls. This will show when an employer hired them. This comparison can tell us how much longer did the unemployment insurance cause good workers to stay unemployed. Or asked another way “how much productivity and tax payments was the US robbed by extending unemployment insurance?”

    In 2009 OBama and Congress spent $793 Billion on deluxe unemployment insurance that has health coverage, that's almost as much as the $1 trillion tax revenue flow for the entire US government (http://www.irs.gov/pub/irs-soi/08fallbulintax.pdf ). The same amount was borrowed to provide more unemployment insurance in 2010. To pay for this borrowing alone, taxes will have to increase at least 400% their current rates.

    Valletta and Kuang did a quick-and-dirty analysis from the Current Population Study data to score political points with those in power. This information is instantly available from the Bureau of Labor statistics. Whoever else wishes to obtain the CPS data and use it for further "studies" will find it on the following website. http://www.bls.gov/cps/.

    If Valletta and Kuang study makes misleading conclusions using inappropriate data, why do you the SF Fed to get away with it? Shouldn’t the Federal Reserve require VALID data be provided If they commission studies that could be used to advocate programs that will more than double our taxes and contribute exponentially to the loss of more jobs?

    Could Harvard’s Dr. Barro be right? Did extending unemployment insurance provide workers with incentives to avoid looking for work?

    To answer that question let’s look at another. Was there employment elsewhere that well-qualified workers might have taken in other states than Michigan? The CNN ‘State-by-State’ unemployment guide for September 2009 shows that Unemployment varied from 9.6% in Michigan to 3.2% for Wyoming. The Median unemployment number was 6.1%.

    If unemployment payments hadn’t have been extended, workers in Michigan with 9.6% unemployment might have tried to find employment in Wisconsin which had 5.6% unemployment. Workers in Rhode Island which had 9.3% unemployment might have gone to Massachusetts which had 5.9% unemployment. If they didn’t mind travelling, the unemployed worker may have gone as far as New Hampshire which had 4.3% unemployment in September 2009.

    In addition to increasing unemployment benefits Democrats also repealed the Section 179 investment deduction. The Section 179 investment tax deduction accelerates deductions for first-time investment. It encourages small businesses to make investments, expand their businesses and possibly hire new employees.

    Which is more detrimental to employment and to our economy?

    Increasing our taxes 400% to pay for two years of deluxe unemployment benefits and destroying job creating incentives by repealing the section 179 investment deductions for small businesses in 2009?

    or

    Spend only what we can pay for in taxes, and restore the Section 179 investment tax deduction that allowing small businesses to expense limited investments in one year instead of 8 to 20 years. Consequently businessmen might expand their businesses and possibly hire new employees?

  • Report this Comment On October 08, 2010, at 1:04 PM, NotEntitled wrote:

    Corporations are made up of people, that's a given. However, individuals not affiliated with a corporation, even collectively cannot have nor have they had the same impact on our economy or cultural sense of economics as our corporations have had. Remember Reaganomics of the 70's-80's? Corporations made a (literally) killing off of buying up other companies, raiding their most profitable feature, including retirement accounts, in order to fund their loans to do so. Granted it was and always will be up to a "Healthy" company to properly protect its assets but during all the massive lay-offs due to plant buy-outs and subsequent closures, we got rid of some heavily "subsidized" industries that could not stand on their own.

    Has the last 10 years been any different when corporations have made multi-millions, seemingly overnite only to go bust and leave thousands of us penniless? Much like the 70-80's era, most money was not made from actually producing anything, it was from money manipulation/transactions. So if we need to get folks back to work so they can go back to being consumers then we need our government to support/subsidize those industries we need the most to stimulate hiring. Why not go wholesale into "Alternative Energy Sources" as the industry that collectively we could and should all benefit from. Eventually the older traditional energy suppliers should see this as the way to do business and might result in a multiplying effect, where the US could "Export" energy. Just a thought or two from one who has gone through many financial ups and downs not because of lack of education, skills or willingness but due to opportunity. My unemployment benefits or temporary welfare status NEVER gave me a sense of entitlement only temporary reprive of sheer fear for myself and family.

  • Report this Comment On October 08, 2010, at 1:26 PM, canoebuff wrote:

    Until the goverment gets the rules straight its hard for a prudent business to plan ahead. therefore hiring will continue to be conservative.Our present legislators are as scary as they have everbeen in my lifetime and I am in my 80's. As a business man I haven't a clue what crazy ideas they will come up with so I'll just hunker down as much as I can and be real careful about hiring

  • Report this Comment On October 08, 2010, at 1:30 PM, SpaceVegetable wrote:

    I can say for a fact that employment in segments of IT is booming right now. I work as a software engineer and I have been absolutely flooded with calls and emails from recruiters. I usually work as a contractor and that form of employment is booming. A lot of unemployed people won't even consider temporary work like this, which really is their loss. Most staffing firms offer some level of benefits nowadays, even though you do have to foot the bill yourself. You're at least getting group rates that way. Personally, I buy my own insurance through my own company that I occasionally use for freelancing and other sporadic work. Sure, it's not a lifestyle everyone can handle, but it sure beats sitting on your butt waiting on employers to find you.

    Another point: Being ineligible for unemployment doesn't necessarily mean you're incompetent. Freelancers and other self-employed don't qualify for unemployment, either.

    Honestly, in this day and age, if you're just waiting around for a company to hire you, you're doing yourself a disservice. You have to think outside the box sometimes and temp employment can be a great way to do it.

    The good news is that temporary hiring tends to lead the way in an economic recovery, so there should be more permanent jobs coming soon. About 1/3 - 1/2 of the jobs I've being contacted about are permanent, so I'd say it's already started.

    Those who think unemployment can allow you to live the good life obviously don't have mortgages, car payment, or health insurance to try to pay for on umeployment. Mine certainly wouldn't be covered by the max benefit, even in MA, which pays the highest rates in the country.

    One other point: NH has a low unemployment rate, but a large number of its residents work in MA, so it doesn't necessarily reflect on the state itself. At my current employer in northeast MA, at least 1/2 the cars in the parking lot have NH plates.

  • Report this Comment On October 08, 2010, at 3:39 PM, MrArgentum wrote:

    "Until the goverment gets the rules straight its hard for a prudent business to plan ahead."

    Then we should be pushing hard for regulators to finalize the rules for medical care and financial reform instead of all this bluster about repealing it. Let's get about the business of restoring reasonable levels of taxation instead of listening to the drearily delusional argument that a increase in top marginal rates from 36 to 39% will somehow destroy the economy. I guarantee you that any business of size has already planned for any of several eventual outcomes of medical, financial, and tax rate reform. They are simply waiting for the debris to settle and biding their time. Once the path forward becomes clear, they will return to investing and hiring. If we continue to thrash around, they will continue the go-slow policies.

    Maybe after the mid-terms and the hangover goes away we will see some progress on nailing down uncertainty when we all wake up still married to each other. That is, unless we go completely over the cliff of "shut down the gummit" and other such idiocies.

    PS - "Those who think unemployment can allow you to live the good life..." should try it and get back to us all about what a cake walk it is. Apocryphal stories - will the mythical welfare queen ever die? - don't nearly measure up to the reality of it. Go ahead, we'll wait up for you.

  • Report this Comment On October 08, 2010, at 11:51 PM, KLIPDOG wrote:

    My fellow fools, all of your reasons are very good, but they are really only sub-reasons. Though some of them may be real "affectors" of the jobs market, we need to open our minds and go back a bit further to the root cause. And the root cause is:

    Abandonement of the gold system.

    When we got off the gold system our reckless human behavoir kicked in, we devalued our currency because we strayed from the forced responsibility that such a system instills, and now, here in 2010, the dying jobs market is just another symptom of decades of currency debasement, which can be blamed for just about everything. Think hard about it.

  • Report this Comment On October 09, 2010, at 11:00 AM, golftee6 wrote:

    One issue I never see raised in conjunction with unemployment is the increasing use of technology to replace actual people. So many office jobs have simply disappeared over the last 20 years. They aren't coming back. No wonder Qwest is laying off people. People are "laying off" Qwest and CenturyTel. Land lines and cell phones are redundant. I live in an area that is completey dependant on Hospitality, Resort Industry, Construction, and Real Estate. The illegal immigrant workers have gone home to Mexico, and local businesses feel their absence. Housekeeping staff still has to be imported from Mexico under special visas, however, because no one here will take that job. Construction on new homes and second homes is dead in the water, and won't come back for several years, if at all. An excellent trim carpenter has a hard time transitioning into other careers around here! I believe that one of the great unspoken reasons for keeping interest rates so low that a housing and real estate bubble was fueled is that it kept employment high in an area that could NOT be sent over seas or replaced by technology. And that play is over.

  • Report this Comment On October 09, 2010, at 1:45 PM, Harley117 wrote:

    To TMFdiogenes who said "most of the deficit is because of reduction in tax receipts rather than increased spending" . Democrats took control of congress in Jan 2007 and spending was at $2.7 trillion. It is now $3.8 trillion or a 40% increase. The cancerious growth of government is part of the problem. Every time the government spends a dollar is takes that dollar from the private sector (at least in the long term) and that takes an economic opporturnty from the private sector.

  • Report this Comment On October 09, 2010, at 7:24 PM, FreeMortal wrote:

    Konczal and Morgan are both right, but I think Morgan gets closer to the core of the cause. The drop in aggregate demand caused employment to drop, but what matters more is what caused that drop in demand. Morgan points to skill mismatch. What caused skill mismatch? Job mismatch. What caused job mismatch? Gigantic debt distortion.

    Lots of good thoughts here, but I see the issues of immigration, technology, and loss of manufacturing brought up quite a bit. These things have a small part, but they are not new and are not the main cause of our current unemployment; they are long, long, ongoing issues.

    Immigration:

    Some of you might enjoy reading about these non-partisan studies on immigration.

    http://www.factcheck.org/2010/05/does-immigration-cost-jobs/

    If you happen to be incurably partisan, check out Daniel Griswold of the Cato Institute.

    http://www.cato.org/people/daniel-griswold

    or Heidi Sherholtz of the EPI.

    http://www.epi.org/publications/entry/bp255/

    To distil, immigration actually creates jobs, at least in the long-run.

    Technology:

    Technology may create unemployment in the short-run, but in the long-run it creates new opportunities for new jobs that never before existed. Technology has been doing this for centuries. Yet here we are, working hard at jobs our ancestors could not imagine.

    This relates to the "we (the US) lost our manufacturing" idea. These jobs probably are not coming back, but this is not reason to rearrange our economy to manufacture more. 200 years ago the US economy was about 90% (ish) agrarian. Most of those jobs were replaced by technology. Now, less than 1% of jobs in the US are farm-related. There is no necessity to get our agrarian sector back, just like there is no necessity for India to get its textile industry back.

    Debt:

    The unraveling of our debt binge is the critical factor in why unemployment is so high right now. It is why skills are mismatched, why credit is harder to get, and why demand has dropped.

  • Report this Comment On October 10, 2010, at 11:17 AM, jbmaine wrote:

    While there are many short-chronology factors to consider in developing effective policies to deal with the recession, I think it may be important to keep in mind that we are in the trough of a 60-year Kondratiev cycle. The trough began with the Internet Bubble burst and is nearer its ending with the Credit Housing Bubble burst. We've been in the trough for a decade. If the parallel to the Great Depression holds, we've got 2-4 more years before the base is established for an economic and market rise. I recall reading an article (1970's I think it was) by, I believe Marchetti, on the cycle, and though I am a poet-archaeologist and not an economist, I recall he saw the trough as a mismatch between capital allocation and the next wave of natural resource innovation and associated technologies. He predicted then and I suppose its accepted wisdom now that the next phase will be natural gas (we call it the 'bridge fuel to the future' now). But maybe something else is in the works, like solar or nano or various combinations. The next 'boom years' won't come til 2025-2035, so we must not have high expectations on the short term. Also I did a look once at impact of WWII on GNP/GDP based on government statistics. Contrary to conventional views, it has zero net impact on recovery. The GNP blipped up during WWII by an amount exactly = to what was lost during the Post-WWII recession. The underlying trend line was unaffected by WWII. Hence a war is not a solution. That the Bush years added war-debt to a depression was very damaging to the economy long-term. At least Hoover didn't try that. So we may take longer to pull out of it. My net conclusion is that as some comments have said, education is absolutely critical. We will need a major realignment of our natural resource and capital allocation match, and I assume research and development and education are critical. Unfortunately in tough times R&D is usually where corporations and government cut first. In the situation we are in that will only make matters worse. Infrastructure investments need to be taylored to the 'new economy' (resources technology/capital matching) and at this stage the most effective investment will be in area of R&D.

    Anyway that's my intuitive poet's thoughts (and where I am putting my small retirement nest egg).

  • Report this Comment On October 10, 2010, at 11:37 AM, ChrisJanO wrote:

    You can Blame Bush & Cheney & Company for all of America's Problems! Two Illegal Wars that have cost over a Trillion Dollars, Social Security Fund Raided, Millions of Americans Laid Off, the Deregulation of the Banking System & Wall Street that led to the Worldwide Financial Meltdown, the Price Of Oil hitting $147 a Barrel, Greedy CEO's like Madoff, Meg Whitman, & Carly Fiorina, Stealing Hundreds of Millions & Billions while Firing American Workers!

    It just proves what happens when you put Criminals in the White House for 8 Years!

    This would have never happened if the Truly Elected President, Al Gore, had taken office and followed Bill Clinton's Proven Track Record with Solid Results!

  • Report this Comment On October 11, 2010, at 2:19 AM, jonesericr wrote:

    I have read a few of the comments posted and being late to the posting on this article allows me the ability to digest this information along with items in the news of late.

    I would like to put forth the idea that most businesses had probably more people than they really needed, in their calculations, and can now rely on an employers market. They can reduce the number of employees, and with unemployment high the rest will work their collective #@#es off to keep their jobs. This means longer daily hours, weekends and no vacation. So the average person may be doing his/her job plus 1.5 other peoples work and not being efficient at anything thing.

    I would have to say that after my bout of unemployment from 2001 until 2003 anyone stating that people on unemployment insurance are refusing to work because they make just as much probably hasn't been making much and/or has never been unemployed. As an IT practitioner I took home around $10K a year in unemployment opposed to over $70K a year when working.

    Unemployment is based on the amount taken out of your check but isn't designed to replace your entire check should you lose your job, just a small portion to "help out" until your find another.

    Nope sorry can't get behind the blame the victim game at this point.

    ej

  • Report this Comment On October 13, 2010, at 2:33 PM, hachmujt wrote:

    @ DDhv, "Your Money or Your Life?"

  • Report this Comment On November 02, 2010, at 7:38 PM, bear1010 wrote:

    A cop in NY retired at age 44 after 25 yrs with a pension of $ 101,500 per year for life with full benefits (reported on NBC news). He will now get another job hoping to get laid off or fired and collect $ 450 per week unemployment added to his pension. When he is 65 he will collect SS and add another 20K to his pension. Sweet deal. I should have been a cop.

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Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1319512, ~/Articles/ArticleHandler.aspx, 8/20/2014 4:01:10 AM

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