The Trouble Behind the New Unemployment Data

The November unemployment data that came out on Friday has Democrats crowing about the drop in the unemployment rate; yet Republicans are rightly pointing out that much of the drop was due to labor-force withdrawal. Neither party, however, seems to be noticing the most remarkable thing: the continuing, constant and historically high share of unemployment accounted for by the long-term unemployed, around 43 percent. This is bad for society for two reasons:

1. The burden of unemployment—the loss in utility—must increase the longer one is unemployed (and has perhaps exhausted savings and unemployment benefits).

2. With unemployment concentrated so narrowly, fewer people than otherwise experience the pain, so the political pressure to do anything to ameliorate the situation is lessened.

The huge rise in long-term unemployment, and the huge rise in the share of income accruing to the top 1 percent of households, both work to dis-integrate American society.


Ivan

"The huge rise in long-term unemployment and the huge rise in the share of income accruing to the top 1 percent of households, both work to dis-integrate American society."

I completely agree with the above said but wow Daniel, I must say, I mistook you for a Chicago shcool economist.

Willie Wilmette

Anyone working in the USA at minimum wage or more is in the worlds top 10% and that is working to dis-integrate world society.

Joshua Northey

Unemployment is at fairly acceptable among people with actual skills. You just have a rough economy causing businesses to shed those with a very bad productivity:price ratio.

The government should make ongoing assistance to these people contingent on their work at bettering themselves, both through vocational training and through actual work performed to develop skills (needless to say working is the best training for working). You want to collect an unemployment check? Scrub graffiti and pick up trash. Conduct tree census for the Department of Natural Resources or whatever menial labor the government can manage to scrape together for you.

If the government is going to be the employer of last resort (essentially what the UI program is) we might as well demand some actual work performed from our employees.

Cor Aquilonis

Wait, so, if a manufacturing quality supervisor loses their position due to a recession in their industry, the best response is to have them count trees instead of searching for work full time? It's best to train that person (who is already well trained for their job function and has transferable skills) by having them *count trees* or *wash walls.* That's going to make them more hire-able?

Have you been unemployed lately? There are a lot of capable people who are out of work because some C-level goober made a few bad calls, and few other firms in their industry are hiring at the moment, and there is lots of competition for only a few jobs. All of which can happen to people with skills.

And unemployment insurance isn't employment of last resort. It's *insurance,* like disability insurance. It's to compensate for bad fortune.

You know what? Your suggestion is so silly, I'm pretty sure it's a troll. Either that, or you left off your /sarcasm tag.

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aepxc

>>Unemployment is at fairly acceptable among people with actual skills. You just have a rough economy causing businesses to shed those with a very bad productivity:price ratio.<<

In the modern economy, the value one creates is much more dependent on the amount of capital one controls (including through one's employer) than one's actual skills. Since this also has the effect of further centralising capital, we are increasingly trending towards a winner-takes-all market structure. Of course, since the propensity to make mistakes is fundamental to human nature (and can never be entirely eradicated through training), the winner-takes-all structure (where fewer people are responsible for more things) also makes economies much less robust.

Cor Aquilonis

1. The burden of unemployment—the loss in utility—must increase the longer one is unemployed (and has perhaps exhausted savings and unemployment benefits).

This is the nastiest part of the "recovery." The long-term unemployed are suffering tremendous damage to their ability to their ability to earn not only now, but well into the future. It's horrible to see so many previously vibrant careers derailed or destroyed.

Related thought: how does one price the value of a career? I've never seen it done, but it seems like something that should be valued and maintained like any other intangible asset. I would love to see something like this on someone's Statement of Net Worth.

Jack

lol I like how you make two perfectly reasonable points...and then slip in a little '99%er' idiom at the end, as if it somehow flowed from your other points.

Karen

they're hiring at GFAONLINE.INFO

Evan Sorem

It is not accurate to say that Democrats are crowing. I don't think anyone would mistake Jared Bernstein for a member of the GOP. He urges caution and runs through the numbers. Just like any sane person should.
http://jaredbernsteinblog.com/about-that-drop-in-the-unemployment-rate/

Scot

The huge rise in long-term unemployment, by nature, is a relatively static group of people (because it is tracking them over a long term). However, the top 1 percent of households is a different group of people today than it was last year -- by about 50%. Half of the people that were in that 1 percent last year are not in it this year, replaced by new people.

So the parting thought about dis-integrating society is skewed. I would expect more from the Freakonomics guys. Don't fall into the mental rut created by putting the 1 percent in an 'us vs. them' context.

Ecoctopus

Subtlety; one of the Hammer's most pronounced traits.

Philip Irwin

If people would learn a new economy and start their own business we could put an end to this failing economy.

Adam B.

Is it unreasonable to ask people to contribute to the economy in some way in exchange for extended unemployment benefits?
The definition of contribution can be very broad. One's contribution could be job training or education. I would even be willing to consider someone raising a child to be their contribution.
However, if you are skipping class or miss that patent teacher conference you are failing to live up to your part of the bargain.

Paul

Joshua says "Unemployment is at fairly acceptable among people with actual skills. You just have a rough economy causing businesses to shed those with a very bad productivity:price ratio."

In 2004 I was a highly skilled software architect but my job was offshored to India. Was not able to find similar employment so took a base level job as a contract programmer. Then took another job as a quality evaluator. Was laid off in 2008 as the recession took hold.

It's now been more than 4 years since I've been employed at a profession I took 20 years to develop skills in. While my skills are still deep and useful, they aren't bright and shiny as someone who uses them every day. Frankly, HR departments look at people like myself as damaged and unemployable.

Please don't tell me about needing to try harder to find a job. I apply every week for jobs I am more than qualified for and I get NO response, not even a rejection. No one can keep it up in the face of having become a non-person.

Mine is not the only profession this has happened in.

Unemployment statistics may be going down. Based on what *I* see around me, the biggest contribution is not people leaving the work force, although that is happening.

I think the biggest contribution to the decline may be that, once your unemployment benefit runs out there is no (visible) mechanism for tracking those who are still looking for work.

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James Gorlick

To Paul and others who IMO tracked too far down the over-specialized path, take a step back and stretch for those more readily hireable skills, like simple website building, SEO, those high value, less techie, more personal skills that hiring people can and will readily see.

I work much on back end components so I understand your pain. Our work is hard to grasp, but we have to work. When I was looking to change employment, I built 3 sites front-to-back, something I don't do in my daily job. It was refreshing. It was recognized by hiring folks. And it made me appreciate more the massive contributions of others in our community. Hosting has become inexpensive and there are so many off-the-shelf components that we used to have to write ourselves or accept poor implementations. I highly encourage you to take this challenge.

If this method doesn't suit you, what is the alternative? It sure isn't to seek an architect position, with the economy in its current state,a large number of developers are out there for the hiring or off-shoring, so employers aren't looking to eek out per developer efficiency. So find an alternative, not a rationalization for your lack of job. Create a job, if need be.

The most effective way to show that you are a problem solver is to solve this employment problem. You can and will do it. And the economy will be all the better.

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vivid dadas

What part of the 43% of the long term unemployed is made up of the "unemployable," and is the number of the "unemployable" changing? By unemployable, I mean that part of the the long term unemployed who by circumstances, pathology, or chance, don't possess even the most basic skills required for the simplest job. I'm talking about just the ability to show up with some predictability, pass a drug/alcohol test, and have the minimum interpersonal skills required to follow simple instructions. Does this number also include those who by temperament, attitude, circumstances, or choice have no interest in ever being employed and is this number changing.