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| The worst is yet to come: Unemployed Americans should hunker down for more job losses |
| 2009-11-18 |
| Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%. While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession. Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession. So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back. There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation. The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost. This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries. Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer. Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more. The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession. As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures. The damage will be extensive and severe unless bold policy action is undertaken now. Roubini is professor of Economics at the Stern School of Business at New York University and Chairman of Roubini Global Economics. |
| Posted by:gorb |
| #12 From each according to his abilities, to each according to his needs, right, Moose? So during a recession, we move the "unemployed" to ND, uprooting all the extended families that might help. And exactly how do they re-integrate into society? Subsistence farming is obsolete. Feeding these people is the least of the problem. Where do they get the "necessities" of modern civilization? If these utopian plans worked, there would still be many communities like the one you're describing. But central planning doesn't work, that's been proven and documented. And a separate city, "mostly" ex-cons whose compensation is taken and given to the homeless? Sounds like something out of Grapes of Wrath. Hm, wait a minute, you're not actually suggesting redistributing wealth, are you? |
| Posted by: KBK 2009-11-18 22:34 |
| #11 Moose isn't far wrong. If you look at the formation of communal colonies (think Shakers) in the US they, not surprisingly, tend to be founded and grow during times of economic distress. And there are plenty of collectives in the upper mid-west. They're Hutterite colonies. Got Milk? |
| Posted by: Nimble Spemble 2009-11-18 21:15 |
| #10 "...you had better hunker down." Unless you're lucky enough to live in one of the 'non-existent' districts. |
| Posted by: Woozle Uneter9007 2009-11-18 20:17 |
| #9 The quickest and most effective way to bring back the jobs is tarrif barriers to all the low cost imports. The problem results from the era of globalization when the USA and Europe exported their knowhow. Products that previously only they knew how to make are now being made more cheaply in China and other places. |
| Posted by: phil_b 2009-11-18 19:32 |
| #8 Besoeker: the purpose of a collective farm is to set people to work for no pay to produce food for someone else. This isn't it. In this case, the purpose of the farm is to save everyone else money by not having to pay to feed them. If there are no jobs in the economy, they can still work to feed themselves, so that they are neither on the dole nor destitute. This is pretty much how people lived before the Income Tax, when they just paid a minimal State tax, and a County tax. The only collective involved is maybe a farm co-op, so they can grow different food to trade with each other, and swap for other stuff as someone new starts making it. Like paying a teacher in food to teach their kids. They aren't making much money, they are treading water until the economy picks up again. And with the ex-cons, they are staying out of harms way while supporting themselves. |
| Posted by: Anonymoose 2009-11-18 18:57 |
| #7 There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Right, another massive stimulus package is just what the Dr. ordered because the previous one has worked SO well. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation. They have a point there. That said, since 1980 the only net job creation in the US has come from businesses that are less than 5 years old. In other words, the only possible way to generate the jobs necessary to pull the unemployed out of unemployment is to promote entrepreneurship and investment. Ergo, keep taxes low or lower them. A well-run government program (a shameless oxymoron, I know) to encourage and support entrepreneurship wouldn't be a bad allocation of taxpayer funds, either. The article says as much itself, "The jobs are not coming back." After this most recent purge, large, well-established firms are only going to start hiring when they believe the recession is in the rearview mirror and capital has started flowing freely again. Given the current state of affairs, that could a couple of years, and that's being optimistic. In the meantime, they will look to outsource and offshore whatever they can and rarely do those jobs ever come back in. Sadly, the 0ne administration seems rather oblivous to all this. |
| Posted by: eltoroverde 2009-11-18 12:51 |
| #6 Well, if they were just motivated enough to move to Minnesota's 357th congressional district, or California's 456th congressional district, they could have gotten one of them sweet stimulus jobs. |
| Posted by: Cornsilk Blondie 2009-11-18 11:39 |
| #5 So it should be a "win" all the way around. Posted by Anonymoose Some folks call em ...'collective farms' moose. |
| Posted by: Besoeker 2009-11-18 10:56 |
| #4 ...because we know how well government plans worked for the Sioux in the Dakotas. |
| Posted by: Procopius2k 2009-11-18 10:36 |
| #3 Recently, I saw a 'bootstrap' proposal that could both help underpopulated States with declining populations, and provide a "safe haven" during severe unemployment and even after recovery. It starts by building two low cost housing cities someplace in perhaps the Dakotas, as a cooperative venture between States and the federal government. Both, separated by a considerable distance, begin by being subsistence oriented farming communities. One of the two is oriented to unemployed families, as a place for them to live during recessions. They basically "work for the food they eat". It is a "temporary charity city" for the most sympathetic of the homeless. It is not like welfare, because it runs on much the same rules as "those who work not shall not eat." Adults work and children go to school. No slackers. The other city is designed for the "permanently unemployable", who for the most part are ex-convicts. It is subsidized by other States as a place to send their "trustee" ex-cons to get them off the street. These are low risk for recidivism, if they can just "get by", and are not forced back into crime to survive. It is more of a permanent set up. A selling point is that it only costs a fraction of the price to keep them in prison, and they are no longer breaking the law. They only get one chance to live there, so if they make trouble, they are sent back to their home State. Ironically, the prison city should make enough money for the State to support the homeless family city. So it should be a "win" all the way around. |
| Posted by: Anonymoose 2009-11-18 09:44 |
| #2 ... as long as you vote Democrat. |
| Posted by: CrazyFool 2009-11-18 08:02 |
| #1 Not to worry---government will take care of you. |
| Posted by: g(r)omgoru 2009-11-18 06:01 |