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Tuesday, July 9, 2013

The New Normal: Big Unemployment

While living in Lincoln, Neb., many years ago, I drove by a man’s house that had caught fire and was burning -- the roof was in flames. Oddly, the owner was out mowing his front yard while his house was ablaze. He just kept his head down and mowed, as if nothing was going on around him.

That image came back to me last week as I was reading The Wall Street Journal, The New York Times, and The Washington Post. I read a lot about immigration, gay marriage, and the environment. Also about the National Security Agency, leaker Edward Snowden, the president’s trip to Africa, and other hot topics inside the Washington beltway. But there was very little in all three papers about the most burning issue of all to Americans: jobs and the economy. D.C. politicians and the media are mowing a metaphorical lawn while the country’s economic house is on fire.

Perhaps America’s political and news leaders have given up on, or simply forgotten about, the unemployed and underemployed. Apparently, Big Unemployment is the new normal. Sure, the president and Congress address it, but rarely in an urgent way.

Just look at last week’s jobs report. The economy added 195,000 new jobs, according to the U.S. Department of Labor. Not terrible, but not good either. Many economists, including Nobel laureate Paul Krugman, say that, given how depressed the economy is right now, we need to be adding 300,000 jobs per month, not fewer than 200,000.

A big problem is that the federal government’s official unemployment rate doesn’t reflect the severity of the jobs crisis -- these data may actually make Washington leadership and the media complacent. Here’s why: The Bureau of Labor Statistics (BLS) defines unemployment as the percent of people looking for a job who can’t find one. So, for instance, if you’ve given up on trying to find a job for the rest of the year, you’re not considered unemployed because you quit searching.

Another problem with the BLS measure: Let’s say you wash my car -- it took you one hour or longer to complete and I gave you at least $20 for the task -- the federal government doesn’t count you as unemployed. That’s even if you’re an out-of-work engineer and car washing is the only work you can get right now.

These measures severely undercount the number of underemployed people in America and are far removed from people’s real experiences and suffering. For example, the BLS reports the adjusted unemployment rate at 7.6% right now, where Gallup shows an underemployment rate of 17.2%. That latter figure is far more worrisome because it indicates that more than 20 million Americans remain unemployed or grossly underemployed.

The BLS jobless rate may make Washington complacent about jobs and the economy overall, but the public is not. As Gallup recently reported, when asked what is their “greatest worry or concern about the future of the United States,” 34% of respondents said the economy, the nation’s finances, or unemployment/jobs. Among topics of great interest to politicians and the media, losing freedom and civil liberties was a top concern of only 4% of Americans, and immigration and border control garnered 2%. And how about this: gay marriage and the environment didn’t even make the list.

U.S. leadership and media are missing the point as much as that guy in Lincoln mowing his yard while his house burned down.


Anonymous said...
July 10, 2013 at 12:48 PM  

Spot-on. I represent one of the un/underemployed, and have for over four years now. I'm smart, well-educated, with a breadth of experience. I do public speaking, volunteer...hiring simply is hard to come by. Only option left, start another new business.

In April, I used the anecdote that, using March's employment numbers, if an Inch (1") represented 100% employment, we moved the needle about 80% the width of a human hair.

In May, someone then asked me what I think the number should have been, based on what's just been reported. Thought I'd share my response.

According to the BLS, April's total size of the Civilian Labor Force was 245,175,000 people. [Note, the CLF is not total population. CLF 'is' the adjustment accounting for military, institutionalized, under 16 y.o., and other non-participants.]

The participation rate was 63.3% or 155,195,775. Unemployment is reported as having decreased by 0.1% (0.001). That means there should have been a net increase of 245,175 new jobs.

However, the CLF (the number of people actually entering the workforce) increased by 180,000 people.

If we increase the workforce by 180K people, and simultaneously decrease unemployment by 0.1%, we should have seen a jobs number of 425,175 new jobs (180 + 245).

Think about that. Excluding all else. Just given new entrants to the job market, and to truly decrease unemployment by the reported Tenth of a Point, we should have seen 425,175 new jobs reported. But, we didn't.

And, this is all basic math using BLS' own numbers. None of it is made up. None of it is biased. You can figure it out for yourself. Start here:

By the way, in terms of the Inch, and a human hair, we should've moved the needle about 5 hairs :).

Anonymous said...
July 10, 2013 at 1:41 PM  

Maybe this is a little short sighted on my part, however, I cringe everytime I see a new automated check out lane in a grocery, ATM's in the lobby of a bank or another short term contractor not having the security of a permanent job. Our corporate culture is so focused on supporting numbers that we aren't supporting people. Investing in a high dollar machine to do a job that a person would be glad to have may cut operating costs, but it cuts the exponential growth that the economy benefits from by having another consumer to stimulate the economy the right way. (Earn a dollar, spend a dollar, sell a product, create a job for someone else. Always seemed pretty straight forward to me.)

charles said...
July 11, 2013 at 12:18 PM  

i too keep track of the WSJ, WPost, NYTimes, NPR and other media outlets and have been disappointed to see outside the BLS jobs report, there is little attention being paid to unemployment, underemployment or even to jobs creation
It seems that to talk about jobs is a knife in the back of a sluggishly improving economy.
The president's council on jobs and competitiveness has not had a formal meeting since Jan 2012. Really?

Anonymous said...
July 11, 2013 at 4:40 PM  

Can Mr Clifton write about how we are going to reconcile the really smart automation that is already in the pipeline that is going to put clerical workers and knowledge workers out of a job. The technology is quickly catching up and one day it will be all too real- where will the jobs come from in such a techno-reality?

Anonymous said...
July 11, 2013 at 7:47 PM  

I'm concerned about jobs, but that doesn't mean I want people to work more. I would love to see a Golden Age in which more people can afford to work less and to invest more in culture. That's the promise of automation. Whether automation fulfills its promise or grows a class gap instead is a matter of leadership. What can leaders do? I would like leaders to raise awareness of our interdependence so that the "Golden Age" option flows from the will of the people. This is a challenge for thought-leaders like Gallup! Perhaps you can educate us about diversity and interdependence though issues like gay marriage and the environment...

Gili said...
July 13, 2013 at 1:35 AM  

The only way to fight unemployment is fund more startups and for unemployed individuals to begin trying to start their own business (start learning about business if you have no previous experience). Small to medium size jobs employee far more people than large corporations.

The next time the economy tanks, the government should let large corporations fail and use the money to fund new startups in its place.

Anonymous said...
July 14, 2013 at 7:34 PM  

Those of us job seekers fortunate to still be receiving unemployment compensation have had this survival stipend recently cut by 16.8%. Pols just keep mowing with their heads down, unlike when travelers flights were delayed by sequestration.
We have powerful and effective checks and balances at work keeping the middle class shrinking. Naïve corporate and political power players think this is good for themselves and the country, but let this ensue much longer and the elite will go down the drain along with the innocent and the ill-informed enablers.

Anonymous said...
July 15, 2013 at 10:46 AM  

I understand your concerns about automation and its impact new job growth. However, we also need to understand that someone needs to make and program these machines. The U.S. economy has failed to leverage new entrepreneurial start-ups in many technological fields. Let's focus our attention on being the leader in innovation and manufacturing and we will be replace some of those unskilled positions that are being eliminated. Our education system needs to become more entrepreneurial and flexible to train the workforce needed for these new opportunities.

Anonymous said...
July 16, 2013 at 4:25 PM  

Thank you for pointing out the massive, and ultimately devastating, disconnect between our elected officials, news media and the rest of the country. Our elected officials continue to operate under the illusion that revenue will somehow magically come pouring in at an ever increasing rate to fund massive initiatives such as the hilariously misnamed "Affordable Care Act". Simultaneously, these officials are continuing to impose ever-more-burdensome legislation and regulations on business under the illusion that our economy is as robust as it was in the 1960's or 1970's. This hastens our economic decline (and attendant decrease in revenue) by effectively driving businesses (and jobs) overseas. And, of course, we have a news media that has apparently lost all ability to objectively report information based on what is of the greatest importance to the lives of the greatest number of people. All told, this is the perfect storm for our economic health and national security.

Anonymous said...
July 31, 2013 at 6:55 AM  

One question: when a person runs out of unemployment benefits, is that person then considered to be "unemployed" or is he/she "not searching for a job"?


Anonymous said...
July 31, 2013 at 7:18 AM  

Whether the unemployment rate is 7.6% or 17.2%, I hear that some (many?) software companies have trouble finding qualified people to hire.

A few months ago, Microsoft was asking for a large increase in the number of people that they bring in from other countries to fill the 3,000+ technical positions that Microsoft supposedly had.

This week, I saw that Amazon in Seattle, Washington, cannot find enough Software Developers in the Seattle area so they are going to Spokane, Washington, to find more developers and pay for their relocation to Seattle.

Are there fewer students getting degrees in Computer Science or Computer Engineering? How do you get more students to get those degrees? And with all of the smart phones, laptops, tablets, etc, etc, why aren't their kids of all ages saying "How did that work? How can I do that?"

This isn't exactly about the original subject but it is still about unemployment or underemployment.

Bill Anon

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