Friday, November 4, 2011

Yes, unemployment is still a crisis

If unemployment was 2% and inflation was 9% the Fed would go nuts trying to change it. So why aren't they going nuts to change the reverse? It is a dual mandate...--SS

Yes, unemployment is still a crisis:

Another month, another dreary jobs report from the Labor Department. The U.S. economy added just 80,000 jobs in October, which isn’t enough to keep up with population growth, let alone get us back to full employment. Indeed, this marks the seventh straight month that the jobless rate hasn’t nudged below 9 percent (it was at 9.1 percent last month). While there are a few bright spots in the report — the numbers for August and September were revised upward by 200,000 jobs — that still leaves vast battalions of unemployed workers sitting out there.

And for a reminder of why this is so alarming, the Hamilton Project has released a study looking, once more, at the heavy long-term toll that unemployment is taking on American workers. The numbers are grim: Two years after losing his or her job, the average worker will earn 48 percent less than previously. Even workers who do find new jobs end up making about 17 percent less, and based on history, those lower wages will likely persist for years to come:

And it’s not just wages that take a hit. As the Hamilton study notes, research has found that extended unemployment can wreak havoc in all sorts of ways. For instance: “One study found that workers displaced in the 1980-82 recessions experienced a 1 to 1.5 year reduction in life expectancy.” Other studies have even found that unemployment can have an impact on the next generation: “Children whose fathers were displaced in the 1980s earned on average 9 percent less as adults than children whose fathers had not experienced displacement and were more likely to receive unemployment insurance and social assistance.”

So there’s good reason, as ever, to see mass unemployment as a full-blown national crisis. But with Congress gridlocked on jobs (just last night, Senate Republicans blocked a $60 billion infrastructure bill) and the Federal Reserve arguing that it can only do so much on it’s own, it’s hard to see this changing anytime soon. On Wednesday, the Fed projected that unemployment would still be hovering around 8.5 to 8.7 percent by the end of next year.

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