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Tag Archives: unemployment

Today, American business pages are full of reports about the shrinking jobs market in the US. Just when many economists were expecting positive news about employment, unemployment rates have grown back to 9.2%, and that is not including underemployment and the large numbers of people who have dropped out of the workforce.

While you might think the concern should be for the unemployed, the focus of most articles is the negative effect on growth, and the problems it presents for Obama’s re-election.

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted.

Most analysts are not yet forecasting an outright slide back into recession, but at a time when President Obama and Congress are focused on spending cuts, Europe is in financial crisis and even China’s growth is slowing, there is little expectation of anything other than a prolonged slog for the United States economy.

Recent debates in the US Congress have focused on the huge public debt and how to address it, raise taxes, cut spending, or both. If you are concerned about employment, it does not look like a good time for worrying about debts, but recent political battles have focused on the debt limit and whether to increase it.

Budget strains were evident in the public sector as the federal government slashed 14,000 jobs, and state and local governments cut an additional 25,000. Nearly three-quarters of the job losses at the local level came in education.

Clearly, further cuts in government spending need to balanced by expansion in the private sector. That takes time, and the priorties may be different, but some are still optimistic.

For hopeful signs, some economists pointed to more recent data showing a pickup in retail sales at chain stores and a rise in an index of business hiring. In manufacturing, analysts expect an increase in auto production in the fall, partly because disruptions in supply will have diminished and partly because of built-up consumer demand.

Daniel J. Meckstroth, chief economist of the Manufacturers Alliance, a trade group, said consumers who had been delaying purchases of cars, washing machines, refrigerators and other big equipment that breaks down over time would eventually start buying again as they paid down debts.

“Spending was severely cut during the recession,” Mr. Meckstroth said. “Now, the longer you wait, the more pressure there is to make purchases. You can’t postpone some things indefinitely.”

Others believe this thinking is overly optimistic.

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Interesting article today on how migration patterns are changing in response to economic changes, with many Europeans choosing to live and work in the developing world rather than their home country.

Europe’s ruinous debt crisis and job-sapping economic miseries are reshaping migration trends, with a generation of home-grown talent grabbing at the chance of economic rewards on continents once treated with disdain.

Portuguese are packing their bags for booming Angola and Mozambique in Africa, and for emerging economic powerhouse Brazil, where there is a shortage of engineers to prepare the country for the 2014 World Cup and 2016 summer Olympics in Rio de Janeiro. Spaniards are being drawn to their former colonies in Latin America.

Most of the data mentioned is from Spain and Portugal, but similar changes are also mentioned for Italy, France, Ireland, and Greece.

The article stresses that people are fleeing unemployment and stagnating economies. As an American expat working in China, I believe there are better opportunities overseas for many people, depending on what you do.

U.S. Federal Reserve Chairman Ben Bernanke is scheduled to testify before the Senate Banking Committee today, and this report gives a helpful glimpse at the difficulties he faces.

We learned in the 1970’s, when OPEC first managed to raise oil prices, about the double-edged sword of stagflation. Oil has become such a strong supply side influence that it can cause both inflation and slow economic growth.

Bernanke wants to maintain the Fed’s 600 million stimulus package to battle low growth rates and unemployment that is still around 9% in the U.S. The problem is that many Americans–and many in Congress–are afraid of inflation and the large public debt in the states.

It is a dilemma, but with inflation at only 0.8% over the last year, I agree that Bernanke is emphasizing the correct problem, despite higher oil prices. The time to fight inflation and deficits is when we see strong growth.

On the other hand, perhaps the American economy has reached income levels where more growth should not be emphasized.

The UN published a report yesterday that says it will take five years for global employment to return to 2007 levels. The reasons offered are not very specific, but it is mentioned that the stimulus packages that have been used have–generally–not been focused on job growth.

An increase in social unrest is predicted, with Europe already experiencing strikes, and protests in some Asian countries.

About 23 million jobs need to be created, and this is their advice about how to do it–

To increase employment, governments need to focus on measures like training, raise the spending power of those with jobs in emerging economies through wage increases and enact far-reaching financial reform, according to the labor organization, a United Nations agency.

Economists generally endorsed the findings of the report, but they noted that if any of the recommendations were simple to achieve, they would have been put in place long ago.

The article is a bit critical of the policy suggestions, observing that training does not necessarily lead to job creation, and wage increases might leave firms with less money to hire new people.

I believe the world needs to accept a Scandinavian style of wealth redistribution. Economists have long dismissed the possibility that wealth suffers from diminishing returns, but I have no doubt that a dollar means more to a very poor man than to the rich. It could lead to more employment as the poor are more likely to spend their income. Even if it does not, it will allow more people to live with some level of dignity.

Obama and the myth of job creation is a story designed for debate. The basic argument is that job creation comes from the supplier–the worker–not from government nor from companies.

When we imagine that government – and even companies – “create” jobs, we’re missing half the story: the crucial part. The part that most of us can actually influence, right now.  

It’s a paradox, but job seekers are actually job creators. People (and the politicians that love their votes) tend to focus on how many employers happen to be hiring. But an overlooked tenet of labor economics says that what’s equally vital to creating jobs is the presence of an adequately skilled workforce capable of filling them. 

In other words, when the workers are ready, the jobs appear.

The author goes on to describe the diffferent ways that job-seekers can retrain themselves for a new career. I have sympathy for the argument, but I think the point is overstated, and–like the article says–it is “missing half the story.”

One point that needs to be made, supply-side incentives can also be encouraged through government and business, not only through the extra dedication of the worker. Secondly, retraining and retooling are solutions for an economy suffering from structural unemployment, but not from cyclical or demand-deficient unemployment. There are some structural elements of the unemployment in US and Europe, but I think most would agree that a lack of investment and consumer spending are the biggest problems.

The article closes with, “a few steps to create sustainable job growth.”

  • redefine the idea af a job to include contract work and free agency
  • retool, quickly and regularly
  • redesign unemployment benefits (like Friedman’s Negative Income Tax)
  • welcome free trade
  • recognize immigration for the competitive advantage it is

Any free-market economist would agree that all of these steps would probably be positive, but now it all seems contrary to the earlier part of the article. How do we change these things without government policy? Government needs to play a role, but maybe a different role than we have seen lately.

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Something I had suspected, but this is the first report I have seen claiming that the US work force is shrinking dramatically.

About 1.7 million Americans opted out of the workforce from July through December, representing a 1.1 percent drop that marks the biggest six-month decrease since 1961, the Labor Department report showed. The share of the population in the labor force last month fell to the lowest level in 24 years.

The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 17.3 percent in December from 17.2 percent.

In an ideal world this is not a terrible situation. Discouraged workers might be returning to school or preparing to work for themselves. Of course there are also going to be incentives for work in the black market, including criminal activity.

The participation rate–the percent of population in the workforce–has fallen to 64.6% in the US. That is the lowest rate in 25 years, but I think pretty high for the developed world.

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In the US, this debate over a new stimulus program points to a radical change in the economies of developed countries since the 1930’s.

In its last vote of 2009, the House narrowly passed the bill, 217-212, without a single Republican supporter.

Democrats tick off the job prospects from the House bill’s $75 billion in infrastructure and public sector spending: tens of thousands of new construction jobs, 5,500 more police officers, 25,000 additional AmeriCorps members, 250,000 summer jobs for disadvantaged youth, 14,000 part-time jobs for parks and forestry workers.

It may be, though, that the republicans’ doubts are realistic.

The job creation issue is complicated. Much of the money in the House bill goes to programs that may stimulate the economy but don’t appear to directly put people to work.

There’s $41 billion to extend unemployment benefits for six months and $12.3 billion to extend a health insurance subsidy for people who have lost their jobs. There’s extension of a child tax credit for poor families, $23.5 billion to help states cover Medicaid costs and $23 billion so states can support some 250,000 education jobs over the next two years. An additional $2.8 billion goes to clean water and environmental restoration projects.

Even the investment in “shovel-ready” highway and bridge projects may not immediately translate into a reduction in the nation’s 10 percent unemployment rate.

It looks to me that the recipients of this new stimulus are government supported projects that probably already have plenty of people available to provide some extra services without hiring new workers.

Dan DuBray, spokesman for the Interior Department’s Bureau of Reclamation, said “Projects in Reclamation are much akin to planes waiting on the taxiway waiting to take off.”

The difficulties point to one of two things, either Keynesian style stimulus programs are no longer viable for modern economies, or the US government is diverting funds towards programs that support the wealthy rather than those in need.

Conspicuously absent from the House plan were President Barack Obama’s proposals to attack unemployment through tax credits for small businesses that create jobs and for homeowners who make their dwellings more energy efficient.

A job-creating tax credit for small businesses has support among some Democrats in the Senate, even though critics fear it may be too complex to work.

It may be that Keynesian policy is no longer viable, but I am afraid also that I do not trust the motivation of the American lawmakers.

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Both sad and curious, Tokyo’s capsule hotels are beginning to be used as homes.

When Capsule Hotel Shinjuku 510 opened nearly two decades ago, Japan was just beginning to pull back from its bubble economy, and the hotel’s tiny plastic cubicles offered a night’s refuge to salarymen who had missed the last train home.

Now, Hotel Shinjuku 510’s capsules, no larger than 6 1/2 feet long by 5 feet wide, and not tall enough to stand up in, have become an affordable option for some people with nowhere else to go as Japan endures its worst recession since World War II.

Rent is equivalent of 640 US Dollars a month. Expensive enough, but cheaper than other options in Tokyo.

Each capsule is furnished only with a light, a small TV with earphones, coat hooks, a thin blanket and a hard pillow of rice husks.

Most possessions, from shirts to shaving cream, must be kept in lockers. There is a common room with old couches, a dining area and rows of sinks. Cigarette smoke is everywhere, as are security cameras. But the hotel staff does its best to put guests at ease: “Welcome home,” employees say at the entrance.

Unemployment is 5.2%, not terrible by today’s global standards, but a record high for Japan, and the poverty rate is 15.7%, very high for an industrialized country.

…about two years ago, the hotel started to notice that guests were staying weeks, then months, he said. This year, it introduced a reduced rent for dwellers of a month or longer; now, about 100 of the hotel’s 300 capsules are rented out by the month.After requests from its long-term dwellers, the hotel received special government permission to let them register their capsules as their official abode; that made it easier to land job interviews.

Surprising for Tokyo, there are probably 10,000 homeless there, many sleeping in Internet cafe’s and saunas.

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This story focuses on Spain, with an incredible youth-unemployment rate of 42.9 %, but mentions similar problems in other countries including the US (19.1 %).

Why is the unemployment so much worse for young workers?

That is because the sectors that employ young people in the greatest numbers — fast food, construction, retail — are expected to take the longest to recover.

Young Spanish workers, like their counterparts in the rest of Europe, face other obstacles like union rules, long-term contracts and legal protections that shelter older workers and discourage new hiring, Mr. Osterman said.

The article also mentions policy as part of the problem:

In part, Spain is paying the price for its efforts to make it easier to put young people to work. In recent years, a disproportionate share of Spanish youth were employed on temporary contracts.

When profits diminish, of course, temporary contracts are the first to go. New policy, is it moving in the right direstion?

Spain is spending roughly 30 billion euros ($43 billion) a year on unemployment benefits, but the money is doing little to prepare younger workers for the future.

Mr. Herce said that Spain needed to invest more heavily in vocational education and retraining, and require the jobless to improve their skills.

Here is where I begin to have questions. Vocational training? Is that not why the young are unemployed now? They trained for a job that is no longer available. Maybe a better alternative is education of basic skills and creative thinking. Train young people to be creative in many different areas. Specialization, in our present world, gives only a temporary reward.

Then again, is it better to hire the young than the old? Many of these more developed countries face problems with government financed pension programs because young workers are less numerous than can afford the taxes to support the upcoming pensions. Which group do you support, older or younger? Younger because they may finance upcoming pension bills? Or the older because they can save and afford their own retirement?

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Christmas posting, here is an article that points to new job opportunities for those trained in rock climbing. Maybe a good example to use when discussing structural unemployment.

Of course wind turbines are not a terribly new technology, but their use has become increasingly  economically viable, replacing some coal and oil  for electricity generation. As fewer workers and resources are used in traditional generation plants, some people will not find viable job opportunities until they get training in a new skill, perhaps turbine climbing.

Merry Christmas!

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