The Great Jobs Drought

The concept of a jobless recovery has been redefined, both for America and for my family, with the new jobs report out this morning. For America, this is the first jobless recovery lacking not only jobs, but also a recovery.  A freind the other day noted it was the 2 year anniversary since that recovery officially began.

With recoveries like these, who needs recessions? 

The mainstream news is saying the paltry job growth is a surprise, but it's not to me. I'll tell you this: as long as the weekly UI claims are above 300,000, there will be no significant recovery. And the reality is that UI claims remain north of 400,000.

For the first time in my family, the 9.2 percent (and rising) unemployment rate is personal.  You see, it's summer time, and we have a newly minted 16 year old male in the house. Annie Lowrey at Slate reminds us that kids these days have drastically worse summer job prospects (25% unemployment) than any generation of kids since such measurements began.  I mean, I'm all for child labor laws, but this is getting ridiculous. We told Sean he couldn't play on his XBox until he got a job, and it looks like the "summer of no fun" is becoming a reality. Next thing you know, the politicians will define away the problem by raising the age of childhood to 33.  Or better yet, wait for them to "means test" the definition of unemployed.  "Don't have a job?  You're officially a child!"

Jobs, Jobs, Jobs

In Kauffman's 1st quarter 2011 survey, I asked top economics bloggers to identify the causes of persistently high unemployment.  The answers were fascinating, but the powerful consensus about uncertainty as the leading cause was a surprise. Here's the chart and table (below) and a link to the full survey.

 
 
All of you following this issue have heard five or ten plans to create jobs - just today! - because every interest group has their pet solution. Surely, some of them have to be right, but can we all agree that they're not the ones being tried?

Here at Kauffman, we tend to believe that since all net jobs are created by new firms less than one year old, gee, maybe policy should focus on a better startup environment and less on big-old-firm bailouts.  But setting all that aside (for a few weeks at least), let's admit that some of the policy perscriptions in place have been, how shall we say, wrong. Doing more harm than good. Colossal embarassments. Ideologically blind. Naive. Failures. No really, please stop helping.

I've already beat the drum against the increased minimum wage (enacted by the Pelosi congress, signed into law by President Bush), and I blame that for our son's predicament, not to mention the sky high unemployment rates among teens, inner city youth, and low-skill workers generally. We have made it illegal for them to work at their marginal value, and thus gain skills that would enhance their marginal value and employability. Nothing like hobbling the weakest among us.

But the minimum wage surely can't be to blame for magnitude of joblessesness.  I do wonder: Is there any bolt of enlightenment shocking Congress to the realization that extending UI benefits from the norm of 26 weeks to 99 weeks didn't work as planned?  Essentially, paying a jobless person half of their salary not to work for 99 weeks all but guarantees their skill set is atrophied and any post-99 job prospects are dim. It was a radical experiment in the blindest kind of Keynesianism, and the results are probably too painful for its authors to ever admit.  I know this isn't one of the top explanations listed above, but the unique persistence of our current joblessnes strongly suggests that the cause is unique.  A sudden quadrupling of UI eligibility is too strongly linked with record-setting long-term unemployment to ignore.

Unemployment is hardly a sleeper issue.  But fixing a dysfunctional UI system is too wonky for most wonks.  That has to change.

 

Comments

[JeffreySummers]

Great post Tim! Couldn't agree more. If you lived in Texas, your son would be employed rather easily though.

[ThinkbigKC]

You make a lot of excellent points, Tim.
As entrepreneurs & business owners, we believe that job creation is a better, more powerful solution to reducing unemployment than extending unemployment benefits that may actually be fostering a prolonged malaise in this country.
Government spending has not created the jobs windfall that was predicted either.
Business owners and entrepreneurs continue to worry about the uncertain economy, mounting national debt, nebulous economic policy coming from Capitol Hill and the subtle vilification of today's entrepreneur that risks their family's savings everyday to build their version of the American Dream. And as you know, this creates jobs for others too, when successful.
Our great country's lawmakers need to put down their partisan swords and have a closer look at what really needs to be done to reduce unemployment now. Or they will risk being in the same unemployment line with the rest of the 9.2% of the USA when their current policy continues to fail..but by then it may be too late.