America’s jobless picture is alarmingly bleak
By Mort Zuckerman

Published: June 6 2010 19:07 | Last updated: June 6 2010 19:07

We are drifting. We take comfort in bits of good news, but we are in dangerous waters; the Great Recession is being starkly revealed as a global crisis with the US, the traditional engine of recovery, sputtering on every cylinder. The US government responded with dramatic financial support by transferring money to the household sector. But outside of these transfers the personal income of Americans is still declining; the residential market remains stagnant at best; consumer growth is nominal. The only real energy in the economy has come from the cessation of inventory liquidation, which is now the main factor in rising industrial output and any modest improvement in the economy.

The mood of US households is despondent. In May only 11.3 per cent believed they would see their income rise in the following six months, while 16.6 per cent thought they would see it decline. This is the first time in over four decades that more people believe they will be worse off than better. Any massive fiscal and monetary stimulus that might reverse the trend is likely to be politically unsustainable given the growing concern over the exploding national deficit.

Wherever you look the scene is bleak. Leading economic indicators fell in April – unusual at such an early stage in the up-cycle. Jobless claims were up by 25,000 to 471,000. And up again above expectations in the first three weeks of May – raising the four-week moving average to a level consistent with 100,000, or more, net job losses. For the past several months, claims have been nowhere near the levels of 400,000 and less that in the past were consistent with sustained job creation. We are not enjoying the normal cycle of economic improvement. If we were, employment would already have reached a new high and made up all of the jobs lost, as it did during the previous postwar recessions. This time we remain short of the old peak of employment, by an astounding 8.4m jobs. One in six Americans is either unemployed or underemployed. This is not a normal cycle when compared with a typical recession, which sees no more than 2m to 3m jobs lost.

Research by David Rosenberg, chief economist at Gluskin Sheff, reveals jobless statistics behind the headline numbers that are downright scary. More than 6.5m people (more than 45 per cent of the jobless) have not worked for 27 weeks or more, compared with 3.2m this time last year.

Wages are falling; wage cuts are spreading as employers continue to curb costs and remain reluctant to hire. And the amount of excess labour continues to increase. For example, the April payroll surged by 290,000 jobs but the labour force soared by 805,000. In effect, jobseekers are overwhelming the number of jobs that are being created. The broader definition of unemployment, which includes partial unemployment and people who have applied for a job within the past year, is roughly 17 per cent. The headline unemployment rate is back up to slightly under 10 per cent, but this covers only people who sought a job in the previous four weeks.

What is the result of an excessive number of people seeking work, with an average of 5.6 people vying for each job opening? Wage deflation. Average hourly pay has not budged since the turn of the year, including one month in which we had a 0.1 per cent decline in average hourly earnings, something that has not happened since April 2003.

This is an unnervingly jobless recovery. After the kind of strong growth in gross domestic product of approximately 6 per cent we had in the fourth quarter of last year, we would normally anticipate job gains of 250,000 a month. Instead we had an average of 31,000 new jobs in the January and February reports – an unprecedentedly minimal growth after such a strong GDP quarter.

We are going to have to develop policies and government support to deal with the long-term jobless who become less employable the longer they lack a regular job. And long-term unemployment has gone from 2m in June 2004 to 6.7m in April 2010. We may have as many as five to eight years of moderate economic growth. To create the 12m jobs to get back to full employment for both the unemployed and new entries into the labour force, when job losses have not even come to an end, seems almost impossible.


The writer is editor in chief of US News & World Report and chairman and co-founder of Boston Properties.


It should be clear enough that we need a comprehensive set of system level changes, and that the 'global economy' as is, is not self sustaining.

The US can not longer be the engine of growth when investments flow abroad, and jobs and industries continue to be exported.

Consider the report today that consumer credit is at an annual rate of 0.5% in April while revolving credit in the US decreased at an annual rate of 12%. Given that M1 is up 6.7% with new consumer borrowing at 0.5%, this implies deflation of 6.2%.

Proof enough that the US will not fund further Chinese, Indian, Indonesian, etc. growth.

When the Chinese realized this several months ago, they stopped pouring in funds from the government into export industries. Last year container ships were sitting in the world's ports stacked hundreds deep and all empty, due to Wall Street's fixation on artificial investments bringing the world economy to the brink, and given that the present world mercantile arrangements are fundamentally unsustainable.

Europe's financial crises and US spending billions on wars for the benefit of the oil industry will not provide for a way out of the debt crises.

Is Obama addressing any of these greater trends? Obama can't even get the Chinese to float their currency, and as is, they (China) are not only stealing jobs from the US, they are stealing them from their Asian neighbors as well.

Didn't Democrats follow Republicans down the path of giving away American jobs, destroying oversight of financial institutions, providing the largest corporations with every tax loophole possible?

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