Persistent Unemployment

2013-02-08 "Long-term jobless crisis stumps experts"
by Peter Coy from "San Francisco Chronicle" [http://www.sfgate.com/business/article/Long-term-jobless-crisis-stumps-experts-4264699.php]
Michelle Hall, 44, hasn't worked since June, when funding ran out for her administrative job at Peaceful Acres Horses, a sanctuary in Pattersonville, N.Y. She applies for jobs online and usually hears nothing.
"It's a feeling of what I'll call emptiness," she said. "I have a lot of skills that are very applicable across the board, from file clerk to middle management."
Hall is the face of a new problem that remains poorly understood: chronic, long-term unemployment that continues even as job growth resumes across the economy. The rate of short-term unemployment - six months or less - is almost back to normal. In January, it was 4.9 percent of the labor force. That's only 0.7 percentage point above its 2001-07 average.
But the rate of long-term unemployment, 3 percent in January, is precisely triple its 2001-07 average, according to a Bloomberg Businessweek calculation based on Bureau of Labor Statistics data. (Those two rates - 4.9 percent and 3 percent - add up to the overall unemployment rate of 7.9 percent.)
A striking statistic: The long-term unemployed make up 38 percent of all workers without jobs, double the average share and just a few notches down from the 2010-11 peak of 45 percent.

Puzzled over change -
Economists are puzzling over what has changed. Is it generous benefits that make it easy to stay unemployed? Or erosion of skills that render people unemployable? Or discrimination by employers?
Peter Diamond, an economist at Massachusetts Institute of Technology who received a Nobel Prize for his work on labor markets, says that regardless of the causes of long-term unemployment, the harm it causes justifies strong efforts to stimulate the economy, so even the long-term jobless are absorbed. Other public policy problems, he said, take second place.
"We have an unemployment crisis and only a debt problem," Diamond said.
One way to visualize this issue is to compare U.S. unemployment with job openings since 2001, as Rand Ghayad, a doctoral candidate in economics at Northeastern University, and his adviser, labor economist William Dickens, have done. Their work was part of a report they wrote that was published last year by the Federal Reserve Bank of Boston. It was so striking that the Boston Fed named Ghayad a visiting fellow.

Employer bias -
Ghayad and Dickens show unemployment only for people out of work more than six months. Their findings depict a conventional pattern until the summer of 2009: Job openings became scarce, and unemployment rose. After that, more jobs began to open up, but long-term unemployment kept rising. The long-term jobless rate has fallen a bit over the past year but is still far higher than it was the last time there were this many openings, from 2003 to 2004.
Ghayad sent out fictitious resumes to employers in 50 metro areas to see how they reacted to long spells of unemployment. He found that an "applicant" out of work more than six months had little to no chance of being called back. The resumes of those out of work for less than six months drew more interest when they showed the applicants had relevant industry experience. At more than six months of no work, having industry experience didn't help at all, Ghayad found.

Opposite views -
Even if employers do pass over the long-term unemployed, that's not prima facie evidence of illegal discrimination. Employers could argue - rightly or wrongly - that being out of work signals something is wrong. It's not illegal in most states for companies to factor in an applicant's job status when filling a position. It would have been under President Obama's American Jobs Act, which was introduced in 2011 but has been blocked by Republican opposition.
The optimistic take is that the bulge is the result of an unusually deep recession and will shrink with time and growth. Picky employers will have to hire the long-term unemployed once the economy fully recovers and the labor market tightens. That's why MIT's Diamond favors more fiscal and monetary stimulus.
"We could cure our problem in fairly short order if we had an adequate stimulus," agreed Steven Kyle, an economist at Cornell University.
Long-term drought
The pessimistic take is that the jobs aren't coming back. Andy Stern, former president of the Service Employees International Union, said the long-term unemployed are among the first to suffer from what he predicts will be a more generalized job drought, which will be the result largely of automation.
Said Stern, who stepped down from the SEIU in 2010 and is a senior fellow at Columbia University's Richman Center for Business, Law & Public Policy: "You ain't seen



2013-02-09 "Unbelievable Headline" [http://innovascapes.blogspot.com/2013/02/unbelievable-headline.html]:
 The San Francisco Chronicle business report (Section D) carries a subtitle: "The Chronicle with Bloomberg".  Presumably, this implies credibility, as in 'connected to reality of business, Bloomberg himself having been pretty good at that.  And of course, Business Week is now a Bloomberg magazine, thin though it has become.
 Front page today, though, carries a story by Business Week Bloomberg editor Peter Coy with this headline: "Long-term jobless crisis is stumping experts".  In seven columns, each a half page long, Coy manages NEVER to mention outsourcing or offshoring, while bemoaning the fact that America's long-term unemployed (those out of work more than 6 months) has tripled in the past five years.
 The lead paragraph says, "here is the face of a new problem that remains poorly understood--long-term unemployment that continues even as job growth resumes across the economy....  The rate of long-term unemployment, 3 percent in January, is precisely triple its 2001-2007 average."
 Why?
 "Economists are puzzled over what has changed.  Is it generous benefits that make it easy to stay unemployed?  Or erosion of skills that render people unemployable?  Or discrimination by employers?"
 Nobelist MIT economist Peter Diamond goes out on a limb and says regardless of cause, this is bad for morale, and demands a public policy action plan.  Unfortunately, I took the science and math side at Caltech, where they teach "cause and effect" as a primary predicate, so my approach would be to say, "ought to know the cause in order to try an effective remedy." Doesn't MIT teach that?
 Editor and writer Coy coyly says "the optimistic take is that the bulge is the result of an unusually deep recession and will shrink with time and growth.... The pessimistic view is that the jobs aren't coming back."  He cites Andy Stern, former president of some union, who observes that there will be a "more generalized job drought, which will be the result largely of automation....  You ain't seen nothing yet."
 My post two weeks ago about Robert Atkinson's new book seems apropos here, when he asserted that the classic neo-economists are delusional, unable to read the tea leaves or anything else.  It's the dismantling of American manufacturing at the root of all of this, acc. to Atkinson, and I couldn't agree more.  Between 2001-2010, IBM grew by 133,000 workers (to 410,000), yet shed 33,000 US jobs.  Ditto HP.  Cisco, Intel, Oracle, Apple all had variants of these offshoring numbers, and in addition, outsourced almost all of their manufacturing.  In the decade, America lost almost half (15,000,000) of its manufacturing jobs, few to automation for that period.
 The service sector is not far behind -- where is your VISA support person living?
 Andy Grove's prescient and alarming article in the same Business Week Bloomberg (July 1, 2010) entitled "How America can create jobs" caused a furor at the time.  One viewpoint from Vivek Wadhwa saying "Why Andy Grove is Wrong..." getting lots of neo-economist praise.  But Atkinson (and me, for that matter) thinks that Grove nailed it.  Worth pondering?