Long-Term Unemployment

by Dave Schuler on April 14, 2014

Robert Samuelson muses about long-term unemployment:

A study by Princeton economists Alan Krueger, Judd Cramer and David Cho is discouraging. Among the long-term unemployed from 2008 to 2012, only 36 percent had jobs 15 months later, the study found. As for the rest, 30 percent were unemployed, and 34 percent were not in the labor force. Even for workers with jobs, success was limited. A third had full-time jobs; the others had part-time or interrupted full-time work.

Disturbingly, the study also argues that labor markets may be tighter than they seem. We could be closer to an inflationary wage-price spiral than the relatively high unemployment rate (6.7 percent in March) suggests. With a lot of unemployed workers, competition for jobs should prevent an inflationary wage surge. But, says the study, the long-term unemployed are so much “on the margins” that they only weakly influence wages. More important is short-term unemployment of less than six months. If it’s low, wage pressures are high; surprisingly, it’s now close to its 20-year average of about 4 percent. This could cause the Federal Reserve to tighten credit to prevent labor bottlenecks.

Of course, that would be disastrous for the long-term unemployed, because it would probably slow hiring and make finding a job even harder. It’s also unnecessary. Other indicators portray a labor market that isn’t tight, notes David Stockton of the Peterson Institute, formerly a top Fed economist. Employee “quit rates” remain below pre-crisis levels, betraying workers’ fears of finding new jobs if they leave the ones they have. Business “hire rates” are similarly low, reflecting ingrained cautiousness. Involuntary part-time work is two-thirds higher than before the Great Recession. A broad unemployment measure, so-called U-6 (covering the officially unemployed plus involuntary part-time workers and “marginal workers”), is 12.7 percent.

None of this describes an economy close to its productive capacity.

Now consider the hot-button political issues of the day. Immigration reform that includes normalization and a “path to citizenship”. Increasing the minimum wage. Increasing the number of people with healthcare insurance. Balancing the budget. Ending global warming.

Whatever the merits of any or all of those issues, it’s hard for me to see how any or them or all of them will result in putting more people who’ve been unemployed for six months or more back to work.

{ 14 comments… read them below or add one }

TastyBits April 14, 2014 at 9:31 am

The problem is that the Democrats cannot get things moving. They have done everything according to the theory, but the theories have not worked. The price for saving the financial industry is the long term unemployed, but that is a small price to pay to keep the rich getting richer.

They do generously throw a few scraps to help out the people who are paying for the bailouts.

steve April 14, 2014 at 11:32 am

This is something I am not sure public policy can address well. I certainly wouldn’t want to hire a doctor who had been unemployed for a Coue of years. I suspect that is true for higher level employees in general. The labor market will have to get pretty tight to get those people back to work. For minimum wage type employees, I think we need a boom of some sort to get them working.

Steve

... April 14, 2014 at 12:20 pm

At the group I used to volunteer with, I knew a man that had formerly been an executive type making six figures a year. A few months back he was ecstatic because, after many years of trying to find work, he had finally gotten a part-time job as a bookkeeper making $12/hr. I finally quit working for them. I couldn’t take dealing with THAT being the only good news we would see, and precious little of it.

That’s the “recovery” that got Obama re-elected with hosannas about a year and a half ago. B-fucking-PLUS, baby!

... April 14, 2014 at 12:24 pm

This is something I am not sure public policy can address well.

Public policy could quit digging a deeper hole.

TastyBits April 14, 2014 at 1:10 pm


Public policy could quit digging a deeper hole.

And now, the rest of the story:

The theory is that there is a feeding trough built 5′ high with a 60 degree slope to 3′ high, and any corn added will be eaten by the taller animals, but they will not get it all. The steep angle will ensure that the corn falls fast enough for the smaller animals to get some.

The corn is eaten to produce poop which fertilizes the crops, and this is what most of the animals eat. The other animal poop also provide fertilizer, and everybody lives happily ever after. But, …

Something has gone terribly wrong. The taller animals keep getting fatter, but the smaller animals only get what the scraps they are tossed. The trough has stopped flowing, and nobody can get it started flowing. All the old tricks are not working.

The trough is actually built at a 30 degree slope, and it is not steep enough for the corn to flow down. All the corn that is poured into it stays at the top, and the taller animals have been eating it for the past 5 years.

What was really happening was that the Fed add a 10 pound bag of corn and the financial industry added 90 pounds of corn syrup. The liquid corn syrup was able to flow down the trough, and the smaller got the corn syrup. Unlike actual corn poop, corn syrup poop is not high quality poop.

The financial industry still has a lot of outstanding corn syrup, and until that corn syrup gets burned off, they are not pouring any more down the trough. And so, here we are.

Credit is all fun and games until somebody loses an eye.

... April 14, 2014 at 1:15 pm

I believe the worst thing about being an LTUE, the absolute worst, is being told over and over again that we shouldn’t be bitter, that we should keep our chins up, that things are going to get better for us any day now. (Or, from Obama ass-lickers, that things have already gotten better and we’re just too racist to notice. As though we would forgo the improvement to our own lives just to make him look bad.)

That’s worse that the self-loathing, the lost income, all of it. There’s nothing that can’t be made worse by having some stupid fuck tell you to keep smiling because you’re bringing them down.

Guarneri April 14, 2014 at 2:55 pm

Has Obama been jawboning the Fed? Answer: No. So what is motivating him?

Has Reynolds decried income inequality? Answer: Yes. Has he ever decried the rising stock market as an overstuffed, Fed driven asset class, rather than evidence of a great Obama economy? Easy money for the auto industry? Answer: No. What is motivating him?

Has steve forgotten the term “liar’s loans” when it comes to subprime driven auto purchases? Answer: yes. What is motivating him?

michael reynolds April 14, 2014 at 6:48 pm

Guarneri:

Um. . . what?

What’s motivating me? Why, screwing the working man of course. Because. . . wait, it’ll come to me. Nope. I give up, you’ll have to tell me.

... April 14, 2014 at 7:10 pm

Democratic pols and their high-end supporters love minorities, because minorities vote overwhelmingly Democratic. Thus they support immigration policies that will make the country less white.

Democratic pols and their high-end supporters love poor people, because poor people predominantly vote Democratic. Thus Democrats support policies that will put more people out of work and lower the wages of those still working. (Immigration works for this one two, especially the immigration polices preferred by the Dems.)

Democratic pols and their high-end supporters love broken families, because single mothers vote overwhelmingly Democratic. So they support policies that incentivize broken homes.

It’s all pretty straight-forward when you look at Democratic policies plus Democratic incentives to stay in power.

Democratic pols and their high-end supporters also love big government, because it provides ways to funnel money back to themselves and their high-end supporters. There’s a reason the banks and bankers got bailed out by Obama much more effectively than did poor people and the unemployed. There’s also a reason steve and the like tend to support Democratic policies: Their sector of the economy is (like finance) on the government gravy-train. Keep the money flowing and they’ll keep supporting the system. See the doctor fix and the most recent changes that have been waived from the PPACA by Obama.

... April 14, 2014 at 7:20 pm

Now Republican pols and their high-end supporters love most of the same things as the Dems do, but they have a slightly different order of who they’d like to see get paid off. Financiers are at the tops of both lists, of course. Republicans generally favor other business ahead of government, though, for who gets paid next.

And so Rep pols also want the country to get browner, but this is because they want to see wages depressed for business reasons, not for voting reasons.

There’s also a difference in vision. Dems want power to accrue to themselves and their party, and act as if that’s what they want. Reps want power and wealth to accrue to themselves, and fuck the party. This is why they don’t worry about changing the demographics of the country in a way that cannot possibly do anything but destroy their party.* That’s a problem for Republican politicians several election cycles down the line, and in the meantime the ones in office now can clean-up from the BIG MONEY behind those changes. I’m not sure there has been a Republican politician that has given a damn about the party, as such, since the Reagan years.

* An exception is granted to the Bush clan, as they now have the son of an illegal immigrant in the pipeline to be a major player, or even President, some day. But don’t be surprised if young Bush switches parties at some point about five years from now, and starts pushing almost the exact opposite of the positions that he holds now. Hey, its working for Charlie Crist!

Michael Reynolds April 14, 2014 at 9:33 pm

Exactly! Big Democratic donors – Silicon Valley, Hollywood and the unions – are conspiring to open the borders and fill the country with brown people so that . . . Uhhhh. Hmmm.

Let’s see. Silicon Valley, Hollywood and let’s go with the teachers unions, want to throw open the borders so that Democrats will win so that… I don’t know. I’m at a loss. Is the grassy knoll involved here?

steve April 15, 2014 at 8:02 am

“Has steve forgotten the term “liar’s loans” when it comes to subprime driven auto purchases? Answer: yes. What is motivating him?”

Auto loans?

Steve

TastyBits April 15, 2014 at 8:52 am

@steve

Before this thread drops off, I think what @Drew(?) is refering to is what is going on with auto loans. I have not kept up on it in detail, but it is a repeat of the 2004 – 2007 housing mortgage market tactics.

... April 15, 2014 at 2:04 pm

Silicon Valley has been caught colludung to keep wages down. And they’re also pushing hard to greatly expand the H1-B VISA program to keep wages suppressed for their coders. (This despite the fact that no real evidence exists that the country lacks sufficient technical talent.)

Leave a Comment

Previous post:

Next post: