Wednesday, July 15, 2009
Mortimer Zuckerman, chairman and editor in chief of U.S. News & World Report, comments on the prospects for an economic recovery in this WSJ op-ed piece, listing ten reasons why the labor market is worse than it appears.
- June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.The notion that employment is a lagging economic indicator is being put to the test during this recession and, as Zuckerman indicates, that doesn't factor in the many nuances in the labor market, some of which have never been seen before to their current extent.
- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.
- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.
Probably the most striking of these many nuances is reason number four discussed directly below - "underemployment" - and those affected by the sharp increase in underemployment would likely disagree with this being characterized as a "nuance".
- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.There are a few more items in the list and an assessment of just how difficult the road ahead will be given all the headwinds now faced by the no longer indefatigable consumer sector.
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).
- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.
It's hard to imagine how any sort of a sustainable recovery can be mounted this time around if it's supposed to look anything like recoveries from the last few recessions.