Saturday, September 06, 2014

The U.S. employment conundrum

U.S. unemployment numbers of various types were released in the last two days.  Broadly speaking, the  unemployment rate came in at 6.1%, on the surface healthy at this stage of the slowly ongoing recovery, but there are many other factors to take into consideration to determine whether the job market has any possibility of recovering to mid-2000 levels.

The good news is that more people are working in many different ways.  The variables are underemployment(working jobs below ones skill level), part time jobs(jobs that do not require full commitments from employers to worker's benefits), the choice not to work(a new issue of late which takes people out of the workforce at all age levels), and off the book's work(mainly in small businesses, home health care, cleaning services, and restaurants).

All of these variables are difficult to measure, but one can be sure that they are impacting actual unemployment.  Underemployment is a rite of passage for young people learning the rigors of full time work and the ins and outs of the company they work for.  Underemployment for mid-life professionals is new, as technology and a continued emphasis on cost cutting and efficiency at corporations creates a constant pruning process, undermining the diminished concept of long term employment at one firm.

Part time jobs are the bane of the employment conundrum.  They are necessary for many people, who patch together part time jobs to create a full time work life, without health benefits or retirement benefits.  They create the issue of whether there are more jobs being counted than more workers being counted by the survey sources.  These jobs are low pay ones generally, and create less than normal worker and employer loyalty by definition.  Long term, they are not, at current numbers, healthy for our economy.

The choice "not to work" has become a growing option for many.  Disability benefits, for some reason so easy to access, can create an alternative lifestyle based on savings and perhaps a working spouse or children.  Savings during the good years can make getting any comparable job to what one has had difficult, and unacceptable in an after taxation analysis.  The end of unemployment benefits creates an incentive to give up the facade of looking for work that was never really looked for.

Off the book's work is the lifeblood of many ethnic communities and many specialties that are needed but too expensive through a formalized corporation.  Those who work in specialties like home health care and cleaning services are often viewed as independent contractors who have their own responsibility for filing taxes. Whether they do is apparently not the responsibility of those who hire them.  Whether those employed are illegal is another issue, but if they work here they still buy goods here and help the economy.

Undesired unemployment is a miserable state.  Strong people can endure it, but it can create a downward spiral of lowered motivation that saps the strength of many.  There are ways to work around it by working with others and family members, but it is a completely debilitating way of living.  Janet Yellen is right to focus on it, but we need a more aggressive approach(see August 3rd commentary here) and better numbers, better measures of what the unemployment issues really are.

One could suggest that an independent survey of all of these variables of employment would be invaluable to economists and investors.  A school like Washington University in St. Louis, with its great reputation for research and its non bi-coastal bias, would be a candidate to do this.  With their strong psychology and sociology departments, both undergraduate and graduate, and their reputable business school, they could undertake a project to survey all of these variables and create a new employment and unemployment map of the U.S.  It would not be easy, but it could be done.  It would be a step toward making the Fed, the Congress, and whatever Executive administrators look at facts rather than political clich├ęs.  Some non-profit, non politically aligned institution should undertake this probably thankless and cantankerous task.  Why not WashU?



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