Here's some controversy to get your day going: Today's swollen ranks of unemployed may only be jobless because Congress pays them to sit on their butts.
That's essentially the conclusion Wells Capital Management chief economist James Paulsen came to in a recent presentation.
Paulsen points out two charts: the first, the Conference Board's "Jobs Are Hard to Get Survey," shows obtaining a job today is no more difficult than during the recession of the early '90s, and easier than during the early '80s. A second chart shows the average duration of unemployment, with today's reading completely off the charts. Says Paulsen:
Could these two charts be explained by government continuing to extend unemployment benefits? If you continue to pay people to stay unemployed, wouldn't this be the expected result? Just something for policy officials to ponder over.
While you're at it, ponder actor and sometimes-economist Ben Stein's recent diatribe:
The people who have been laid off and cannot find work are generally people with poor work habits and poor personalities. I say "generally" because there are exceptions. But in general, as I survey the ranks of those who are unemployed, I see people who have overbearing and unpleasant personalities and/or who do not know how to do a day's work.
Today's unemployment disaster needs an explanation beyond the traditional "it's a bad economy" reason. But neither Paulsen or Stein's argument is very convincing. Stein's theory is anecdotal to the point of irrelevancy. Paulsen's theory has been mostly discredited by the Federal Reserve Bank of San Francisco, which found that those receiving unemployment benefits stay out of work for only about a week longer than those who don't.
So what, then, does explain why the job market is unforgiving for so many, but not that bad for so many others?
I think it can be explained by simply acknowledging that what we just went through was not a run-of-the-mill recession. It was an economic reset. The difference between the two is explained succinctly by Agora Financial's Bill Bonner:
In a recession, you have growth, and then the economy runs too hot, and then it has got to cool down for a while. And when it's cooling down, people get laid off. And then when it warms up again, they get hired back at the same jobs and things go on. But that's not what's happening now. People are not getting laid off. They're getting fired. And they're fired permanently because the jobs are not just cooling off; those jobs are disappearing.
Everyone knows the past decade bred dangerous imbalances, and that those imbalances need to be eradicated. But there's a stubborn refusal to accept that this means millions of jobs are lost and will (hopefully) never return. I'm talking about the 2002-2007 plague-like outbreak of real estate agents, landscapers, mortgage brokers, home appraisers, construction workers, luxury retailers, auto dealers, and who-knows-what else. Almost one-quarter of all new jobs created between 2003-2006 were housing-related. Many of these workers who are now unemployed will never find a similar job again. More specifically, they never should have been employed in these jobs to begin with. They were riding a bubble that's now destroyed.
Thankfully destroyed, I should add.
Haves and have-nots
But the process of cleaning up burst bubbles is a messy affair that has essentially split the economy in two. Industries today are either doing great, or they're in relative shambles. Just look at corporate earnings. Some companies, like Wal-Mart
And that inequality spills over to the labor market. A person's job prospects today are almost entirely dependant on whether their marketable skills were learned in conjunction with the bubble, or whether they're skilled in solid, sustainable trades. For those in the former group, today feels like a Great Depression with little to no light at the end of the tunnel. But for millions of others, today's job market really isn't that bad, with prospects recovering nicely. Put the two together, and you can see why encouraging metrics like the "Jobs Are Hard to Get" survey can conflict with other data points that show masses of workers caught in almost unbreakable joblessness.
Think of a group of people stranded on an iceberg: 70% are able fishermen from Alaska, and the other 30% are mortgage brokers from Los Angeles. If you polled these people on how difficult it was to make it through the day, the average response wouldn't be so bad. But a closer look would show that 30% are dangerously helpless and vulnerable.
That's today's economy.