Until It’s Too Late
Courtesy of Michael Panzner at Financial Armageddon
Throughout the financial crisis, policymakers have focused on keeping things afloat until the storm passes. They’ve spent vast sums of taxpayer funds trying to jumpstart growth until the economy is back on track. They’ve encouraged people to keep the faith until businesses start hiring again.
But what happens if all those "untils" turn out to be wide of the mark? What if the carnage we’ve experienced so far is structural, not cyclical? If that’s the case, then Americans are going to find that instead of experiencing better times ahead, they are going to be much worse off than they were — or are.
Why? Because they’ve not been adjusting lifestyles and spending habits to take account of a step-change decline in living standards. And, they’ve not been reorienting the way they manage household finances and investments to take account of a much riskier economic and financial outlook.
In addition, many people have not been focusing strongly enough on acquiring new skills and seeking alternative careers that take account of big changes in the job market. As the following collection of articles suggests, not only is the overall employment situation likely to remain problematic for years to come, prior work experience may no longer be relevant.
"Getting Back Lost Jobs Could Take 5-Plus Years" (Associated Press)
Even with political focus on jobs, return to prerecession work levels could take 5-plus years
Job creation is stuck on an uphill treadmill.
So many jobs have been lost that the U.S. must run hard just to keep from losing more ground. Despite the election-year emphasis on job creation by both parties, the short-term outlook is bleak.
While many economists believe the recession is technically over, nearly 15 million Americans remain unemployed. Six million of them have been out of work for more than half a year.
President Barack Obama is asking for almost $300 billion more for recession relief and job formation. The House last December passed a $154 billion spending bill focused on jobs. The Senate is due to debate a far more modest version on Monday, but appears bogged down in partisan bickering.
With or without new legislation, reducing a jobless rate that’s now just under 10 percent to prerecessionary rates of about half that won’t happen soon, especially as government efforts to prop up the economy begin to wind down.
It could take up to five years or more just to get back to even.
There are limits to how many jobs can be created by government action — either directly or with tax and other incentives for the private sector — and how quickly.
"We’ve gone though a period of enormous job loss," said Robert Shapiro, a former adviser to President Bill Clinton and now chairman of Sonecon, an economic advisory firm.
"The long-term problem is exacerbated by the fact that credit’s still not available because we really haven’t reformed the financial system. People don’t have confidence in the future and people are poorer so demand is down. All these things are coming together," Shapiro said.
Returning to prerecession employment levels and keeping up with working-age population growth will require the creation of 10 million or more jobs.
"Despite Signs of Recovery, Chronic Joblessness Rises" (New York Times)
BUENA PARK, Calif. — Even as the American economy shows tentative signs of a rebound, the human toll of the recession continues to mount, with millions of Americans remaining out of work, out of savings and nearing the end of their unemployment benefits.
Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.
Call them the new poor: people long accustomed to the comforts of middle-class life who are now relying on public assistance for the first time in their lives — potentially for years to come.
Yet the social safety net is already showing severe strains. Roughly 2.7 million jobless people will lose their unemployment check before the end of April unless Congress approves the Obama administration’s proposal to extend the payments, according to the Labor Department.
Here in Southern California, Jean Eisen has been without work since she lost her job selling beauty salon equipment more than two years ago. In the several months she has endured with neither a paycheck nor an unemployment check, she has relied on local food banks for her groceries.
She has learned to live without the prescription medications she is supposed to take for high blood pressure and cholesterol. She has become effusively religious — an unexpected turn for this onetime standup comic with X-rated material — finding in Christianity her only form of health insurance.
“I pray for healing,” says Ms. Eisen, 57. “When you’ve got nothing, you’ve got to go with what you know.”
Warm, outgoing and prone to the positive, Ms. Eisen has worked much of her life. Now, she is one of 6.3 million Americans who have been unemployed for six months or longer, the largest number since the government began keeping track in 1948. That is more than double the toll in the next-worst period, in the early 1980s.
"Recovery or Not, Some Charlotte-Area Jobs Are Gone Forever" (Charlotte Observer)
Experts say new economy can no longer support some jobs created during the boom, including finance.
Despite some hopeful signs, the Charlotte area’s economy won’t outpace unemployment anytime soon, economists warn.
Some jobs are gone forever, and those that will replace them could leave the region’s lowest-skilled and least-educated workers struggling to catch up, experts say.
"The question is, are growth levels adequate enough to get us out of the hole we’re in? It doesn’t look like it," said John Quinterno of South by North Strategies Ltd., a Chapel Hill economic research firm.
Some jobs are cyclical, and economists expect them to bounce back once demand and consumer spending increase. But they worry: Government stimulus spending, which has helped spur that demand, is not a permanent fix. What’s more, a larger shift is under way, with the economy moving from production to services-based.
Economists say the new economy can no longer support some construction, real estate and finance jobs created during the boom. Many manufacturers, too, will continue to do more with less, replacing workers with technology and sending more jobs overseas.
"Fed See Slow Job Recovery into 2012" (Journal Sentinel)
While the economy is getting better, the jobless rate is expected to remain high – possibly for years – because of financial uncertainty among households and businesses, Federal Reserve policy-makers said when they met in a closed-door session last month.
Minutes of the Fed meeting of Jan. 26-27, which were released Wednesday, show that officials think the unemployment rate this year will range between 9.5% and 9.7%, and from 8.2% to 8.5% in 2011. In 2012, the rate likely will be between 6.6% and 7.5%, the Fed panel forecast.
A "sizable minority" of the Fed policy-makers took the view that a return to more-normal growth and employment could take more than five to six years.
"The Long-Term Employment Bust" (First Things)
High levels of unemployment may last indefinitely. A number of economists (including this writer) have been warning about permanent joblessness, and the idea is now seeping into popular magazines.
More than 8 million American jobs were lost since 2007, based on the most recent revision of the overall job count of U.S. establishments. But that is not the worst of it, because the establishment survey fails to capture smaller businesses and the self-employed. By the Bureau of Labor Statistics’ broadest measure of unemployment, including the forced part-time workers and so-called discouraged workers, the unemployment rate rose to 17 percent from 8 percent before the recession. That is 9 percentage points, corresponding to slightly over 12 million adults. A website called Shadow Government Statistics includes “long-term discouraged” workers defined out of the labor force by the BLS, but that alternative measure has tracked the BLS broad measure quite closely in the past few years.
There are several reasons to believe that most of these jobs never will come back. That is a less contentious statement than it might appear, because the jobs lost in the recessions since 1981 never came back. Some sectors, notably manufacturing, continued to shrink, and other sectors, such as heath care and retail, replaced them. The difference in 2010 is that it is not apparent where new jobs will come from.
"How a New Jobless Era Will Transform America" (The Atlantic)
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.
How should we characterize the economic period we have now entered? After nearly two brutal years, the Great Recession appears to be over, at least technically. Yet a return to normalcy seems far off. By some measures, each recession since the 1980s has retreated more slowly than the one before it. In one sense, we never fully recovered from the last one, in 2001: the share of the civilian population with a job never returned to its previous peak before this downturn began, and incomes were stagnant throughout the decade. Still, the weakness that lingered through much of the 2000s shouldn’t be confused with the trauma of the past two years, a trauma that will remain heavy for quite some time.
The unemployment rate hit 10 percent in October, and there are good reasons to believe that by 2011, 2012, even 2014, it will have declined only a little. Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.
All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.
There is unemployment, a brief and relatively routine transitional state that results from the rise and fall of companies in any economy, and there is unemployment—chronic, all-consuming. The former is a necessary lubricant in any engine of economic growth. The latter is a pestilence that slowly eats away at people, families, and, if it spreads widely enough, the fabric of society. Indeed, history suggests that it is perhaps society’s most noxious ill.
The worst effects of pervasive joblessness—on family, politics, society—take time to incubate, and they show themselves only slowly. But ultimately, they leave deep marks that endure long after boom times have returned. Some of these marks are just now becoming visible, and even if the economy magically and fully recovers tomorrow, new ones will continue to appear. The longer our economic slump lasts, the deeper they’ll be.
If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.
