The Real Unemployment Scandal?

Leo Kolivakis's picture

Via Pension Pulse.

Discussing the latest US jobs report, Greg Ip of The Economist comments on jobless agonistes:

had risen in the past week that America’s economic soft patch was
ending. They have just been doused with a bucket of cold water. The job
market showed further deterioration
in June from May, the government reported today. The number of
non-farm jobs rose a meager 18,000, lower even than May’s 25,000 number
(itself revised down from the original estimate). The two months
together mark a dramatic deceleration from the previous three when
payroll growth averaged 215,000 per month.


The unemployment rate,
meanwhile, rose for the fourth consecutive month to 9.2%, from 9.1% in
May. It was 8.8% in March. The economic recovery celebrated (if you
could call it that) its second anniversary on July 1st, and in that
time the unemployment rate has moved a lot while ending up almost
exactly where it began. America has made almost no progress closing the
output gap opened up by the recession. The
U-6 unemployment rate, which includes people who have given up looking
for jobs and part timers who want full time work, shot up to 16.2%
from 15.8% and the average duration of unemployment hit a new high of
39.9 weeks. More women than men lost jobs.
Indeed, since the recovery began, women have fared worse than men, a reversal of the pattern during the recession, as a new Pew study documents. Still, the male unemployment rate rose more last month than the female rate.


deeper, the details grow worse. Hourly wages failed to rise and the
average work week shrank slightly—bad news for income and thus
purchasing power. The survey of households, from which the unemployment
rate is drawn, shows a much bigger plunge in employment, at 445,000,
than the payroll survey. The household survey is less reliable but is
still a useful check. It tells us the payroll report is not understating
the strength of the job market.


There is no good news in this
report; in the category of "could have been worse," private sector job
growth was better than the overall total, at 57,000 last month. Public
employment fell, for the eighth consecutive month, led by more layoffs
by state and local governments.


The best explanation for the sharp
slowdown in the jobs market is the confluence of bad luck that hit the
economy this spring: a sharp increase in petrol prices, a series of
natural disasters, and the Japanese tsunami and earthquake that
interrupted supply chains in electronics, automobiles and other
industries. Most of these temporary restraints have begun to lift. The
weather is back to normal, petrol prices are down 10% (nearly 40 cents
per gallon) from their peak, and Japan’s disruptions are ending.
Automobile production schedules are ramping up and the Institute of
Supply Management found that factory activity improved from May to June.
Manufacturing employment rose last month, albeit by only 6,000. Even
Greece seems, yet again, to have muddled through its latest confidence
crisis (but keep your eyes on much bigger Italy).


In all
likelihood, the employment data will improve in coming months as
consumer purchasing power and business spirits recover from the fuel
price surge. Yet as we argue in an article
in this week’s issue of The Economist, there is more to the
disappointing trajectory of the recovery than these temporary
restraints. America has only just begun
to deleverage and a McKinsey study has found that comparable episodes
in history have been accompanied by anemic growth and often a return to
While America probably won’t fall back into
recession absent some new shock, its workers should get used to
stop-start growth punctuated with disappointments and soft patches.
Americans are not alone in this; Britain has experienced similar
disappointments and Spain’s outlook is even more anemic. Both share
America’s pre-existing condition of vastly overstretched household
balance sheets and the opportunistic infection of exploding government


While most of Europe is ahead of America in implementing
plans to arrest the rise in government debt as a share of GDP, America
is just beginning. In Washington, the mood surrounding negotiations
over an increase in the statutory debt limit took a turn for the better
this week as Republicans signaled flexibility on taxes and the
Democrats did likewise on entitlements. This may be good news
politically but it is ambiguous, and possibly bad, economically, if the
final deal front-loads, rather than back-loads, the pain. The steady
bleed of public sector jobs shows state and local government austerity
is already weighing heavily. Federal fiscal policy is scheduled to
tighten in January when a temporary investment tax credit and payroll
tax cut expire. Layering on more austerity would pummel an economy
still struggling to achieve a virtuous circle of jobs, income and
spending. Mr Obama is reportedly pushing to extend the payroll tax cut
for another year. That would be good, but that would not represent new
stimulus, merely a softening of the fiscal restraint already in train.


what about the Federal Reserve? Its second round of quantitative
easing (QE) was completed at the end of June. The consensus is that it
would have to see deflation looming to implement more. I think the bar
is lower than that. Ben Bernanke, the
Fed chairman, has always worried that rising unemployment could spark a
pernicious cycle of declining confidence and spending. If its recent
rise continues into the third quarter, expect to see Wall Street raise
the odds on QE3.
It’s too soon to write the recovery off, but not too soon for contingency planning.

say the odds of another QE3 were slim prior to the latest jobs report
and they now stand at 50-50. If employment growth doesn't pick up
significantly over the next few months, QE3 is a done deal, and Wall
Street will celebrate by bidding up risk assets.

The real
structural problem in the US labor market is that there are really two
economies since the early 80s: the financial economy made up of bankers,
traders and money managers on Wall Street and the real economy made of
manufacturers but mostly of small businesses. The latter are struggling
while the former keep enjoying record bonuses. Nothing is trickling
down, and even if it is, it's so minute that it doesn't make a
difference. Even cash rich corporations are in no hurry to hire because
they're producing more with less and they've got no confidence that this
is a sustainable recovery.

And as TomDispatch associate editor Andy Kroll
points out, for all the verbiage about jobs that will be coming your
way, there’s one part of the American jobs crisis deserving screaming
headlines that the politicians won’t be talking about, the 60-year unemployment scandal:

Live in Washington long enough and you'll hear someone mention "east of the river." That's
D.C.'s version of "the other side of the tracks," the place friends
warn against visiting late at night or on your own. It's home to
District Wards 7 and 8, neighborhoods with a long, rich history. Once
known as Uniontown, Anacostia was one of the District's first suburbs;
Frederick Douglass, nicknamed the "Sage of Anacostia," once lived there, as did the poet Ezra Pound and singer Marvin Gaye. Today the area's unemployment rate is officially nearly 20%. District-wide, it’s 9.8%, a figure that drops as low as 3.6% in the whiter, more affluent northwestern suburbs.


D.C.'s divide is America's writ large. Nationwide, the unemployment rate for black workers at 16.2% is almost double the 9.1% rate for the rest of the population. And it's twice the 8% white jobless rate.


size of those numbers can, in part, be chalked up to the current jobs
crisis in which black workers are being decimated. According to Duke
University public policy expert William Darity, that means blacks are
"the last to be hired in a good economy, and when there's a downturn,
they're the first to be released."


That may account for the
soaring numbers of unemployed African Americans, but not the yawning
chasm between the black and white employment rates, which is no
artifact of the present moment. It's a problem that spans generations,
goes remarkably unnoticed, and condemns millions of black Americans to a
life of scraping by. That unerring, unchanging gap between white and
black employment figures goes back at least 60 years. It should be a
scandal, but whether on Capitol Hill or in the media it gets remarkably
little attention. Ever.

Indeed, nobody wants
to talk about the shockingly high unemployment rate among black
Americans because they've been largely written off. I'll tell you about
another scandal that nobody talks about, the unemployment rate of
disabled persons which is closer to 85%, and that's being generous.

take the rights of disabled people very seriously partly because I have
MS and it makes me extremely angry at how prejudiced employers are
towards disabled persons. One trader recently sent me an email telling
me the following:

offense, but that MS will likely be the preventing factor to your
being hired (large orgs fear large disability expense, small orgs can
ill afford any absence) - I know two guys with health issues (a guy who
is a cancer survivor with diabetes, another had a liver transplant)
and group benefits/life-insurance are a factor in them staying in
sub-optimal they save/invest like fiends since they are
parents with abbreviated life/mortality expectations

I wasn't offended at all and told him he's right, most organizations --
private corporations, federally chartered banks and even government Crown
corporations and government departments -- will treat people with a
serious preexisting condition as a liability (one day, I will expose
these organizations and their discriminatory practices). This is why I
decided to teach myself to be completely self-sufficient, focusing on
trading stocks, consulting and business ventures where I control my own destiny. No more sucking up to
anyone for a job!
If you don't want to hire me because I have MS, that's your problem and I don't want to work for you!

my MS doesn't control me; I am feeling better than ever and will beat
this bloody disease because I'm the toughest SOB you'll ever meet. MS or no MS, I'll take on the world!
But that's not the case for many who are much worse off than I am and
can't fend for themselves. Many disabled are stuck collecting disability
insurance, living in poverty, all because they are ostracized
from a shallow society who only sees them as a liability. That's the
real unemployment scandal and anyone who thinks otherwise is an utter
fool who's never walked in their shoes and felt the stinging pain of
blatant discrimination.