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.

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  1. Ivan says:

    “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.

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    • Willie Wilmette says:

      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.

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  2. Joshua Northey 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.

    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.

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    • Cor Aquilonis says:

      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 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 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.

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      • James says:

        So how do you search for work full time? There is (at least in my experience) only so much you can do: check on-line employment postings, do a bit of networking (but you can only do so much of that before people stop answering your calls), and so on. Uses maybe an hour or two a day, so what do you do with the rest of your time? If you can find something productive, even counting trees, that gets you out and maybe earns you a bit, isn’t that better than sitting in front of the TV all day?

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      • Enter your name... says:

        James, at least the initial stages of job search can, and usually should, take far more than one or two hours a day. Most people could easily spend eight hours researching one position at one company, targeting their résumés to the specific needs of that position, writing a custom cover letter, and filing an application for one white-collar job.

        Sure: it only takes an hour to look over the newest online job listings and determine that there’s nothing you particularly want to apply for. But that’s not a winning job search process. That’s a search process that results in long-term unemployment.

        Additionally, most unemployed people don’t spend all day watching television. What economists call “home production” (all those minor repairs and other tasks you never had time and energy for) goes up noticeably during periods of unemployment.

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      • Blorf says:

        A manufacturing quality supervisor (or housing contractor, or realtor or whatever) who hasn’t worked at that job for 2-3 years isn’t a manufacturing quality supervisor anymore. Their skills, or what’s left of them, aren’t as valuable to society as you’re suggesting. Otherwise they’d already be hired. Or maybe they weren’t willing to move, or accept less pay, or some other issue?

        We have an incredible number of people with unmarketable skills due to malinvestment caused by the central planning brigade who brought us the housing boom/bust. Mortgage brokers, realtors, etc. It was the hot industry due to the credit bubble. The vast majority of these people will NEVER work at that job again.

        Unemployment benefits are “insurance” only in the loosest sense of the word. What kind of insurance keeps getting extended in perpetuity beyond the original terms? Long term unemployed need to be encouraged to move to where there are jobs, change careers, lower salary expectations.

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    • Ken says:

      I’ve thought about something like this, although I think actual work should be limited to the long term unemployed. For the newly unemployed, if they want to develop new skills, help pay for retraining, but even those with in-demand skills face periods of unemployment, so allow them to search for six months first.

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  3. Cor Aquilonis says:

    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.

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  4. Jack says:

    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.

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  5. Karen says:

    they’re hiring at GFAONLINE.INFO

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  6. Evan Sorem says:

    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/

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  7. Scot says:

    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.

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  8. Ecoctopus says:

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

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