Job insecurity

May 19, 2014

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Even positive news about long-term unemployment is depressing. 3.4 millionAmericans have been out of work for more than 27 weeks, a million less than last year. (27 weeks is the widely used definition of long-term joblessness.) Despite its recent decline, there’s still more long-term unemployment in the U.S now than in any pre-recession period since data-keeping began in 1948.

Matt O’Brien finds that your chances becoming a member of the long-term unemployed are almost twice as bad today as after the dot com bust. “Long-term unemployment isn’t a story about lazy people choosing to live on the dole instead of getting a job”, says O’Brien. “It’s a story about people who want a job not being able to find one… It’s a story about  macroeconomic bad luck”. The long-term unemployed are, on average, about as well educated as the shorter-term unemployed. (And the often-talked-about skills gap issomething of an urban myth across the board, according to Inc.’s Cait Murphy).

Paul Krugman thinks O’Brien refutes the idea “the long-term unemployed are workers with a problem”. In Krugman’s view, it’s not personal:

In 2000, with labor scarce, there probably was something wrong with many people who got laid off; in 2009, it was just a matter of being in the wrong place. So if unemployment was about personal characteristics, being unemployed should have mattered less for job search after the Great Recession than before. What we actually see, of course, is the opposite.

Krugman’s solution, not for the first time, is more stimulus. But he’s not, by his own admission, averse to repetition.

Justin Wolfers sees increasing evidence that the current jobs malaise is permanently scarring the U.S. economy. He concludes that the U.S. labor market is (maybe) not broken. The relationship between the unemployment rate and the job vacancy rate (the Beveridge curve in econo-speak) has historically been inversely correlated: when one rises, the other falls. After the financial crisis, however, both rose. Now, says Wolfers, unemployment is falling and job openings are staying flat, supporting the idea that the recovery will make make the damage done by the recession temporary.

The chance of almost any policy help is slim. Since the end of 2013, 1.3 millionAmerican have lost federal unemployment benefits. A retroactive reinstatement of those benefits has passed the Senate, but is going nowhere in the House. Even if it were politically possible, in the larger scheme of the underwhelming recovery, federal unemployment benefits are a small bore, if tangible, response. Diane Swonk, chief economist at Mesirow Financial, says the U.S. has a “wound that’s too gaping to be covered by a band-aid”. If passing unemployment benefits is unlikely, there’s almost no hope for a true economic bandage like broad stimulus. — Ben Walsh

On to today’s links:

The ROI of American colleges – Radio Open Source
The top 20% captured 80% of post-recession income gains – WSJ

Headline of the Day
Thomas Friedman learned a new shape – Gawker

AT&T wants to buy DirectTV for $48.5 billion – Reuters
AstraZeneca rejects Pfizer’s final offer, which probably won’t be Pfizer’s final offer – FT

Financial Arcana
Counting (and double counting) cleared OTC derivatives – ISDA Blog

Surprising no one, the price of cable TV has risen four times faster than inflation – Ars Technica

Data Points
Over the last two centuries, the stock market provided great 40-year returns – The Conversation

Study Says
Giving cash to the poor and hungry is better than giving food – Chris Blattman

Twitch has more primetime broadband traffic than Hulu and Amazon – The Verge

Mas Kapital
RIP Deutsche’s plan to boost capital by making money. It’s raising $11 billion instead –WSJ

Crime and/or Punishment
Credit Suisse pleads guilty to criminal charges – DealBook

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