Why the U.S. may have a long-term unemployment problem

November 30, 2009

Wachovia’s John Silvia:

In recent years, permanent layoffs have surpassed temporary layoffs and this is reflected in the rapid rise in the mean duration of unemployment. In addition, the disparity of unemployment by education levels signals that the demand of employers for more highly educated workers does not fit well with the available supply of workers. Current policy initiatives have perverse economic effects. Health care mandates will likely raise the cost of labor and thereby discourage hiring.

Second, the increase in the minimum wage has clearly negatively impacted hiring teenage workers evident in the recent increase in teenage unemployment rates. Cap-and-trade will likely increase the cost of energy and transportation for employers and thereby reduce any funds left to hire workers. At present, the uncertainty about potential micro policies is more than offsetting any positive impact on jobs from the fiscal stimulus.


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“the uncertainty about potential micro policies is more than offsetting any positive impact on jobs from the fiscal stimulus”worth repeatingover and over again.

Posted by bryan | Report as abusive

Don’t let anyone fool you: there are plenty of jobs out there. It’s just a matter of who you know, being at the right place at the right time, and whose ass you’re willing to kiss. It’s always been this way, and will always be this way until people change.

Posted by Mufaso | Report as abusive

With all do respect Mufaso, there are not “plenty of jobs out there” and it hasn’t “always been this way”.Yes, you can get a job, if you are qualified, diligent and lucky…….If I was confronted with a highly qualified candidate (not that I’m even looking at resumes in the current climate) that was a perfect fit, what would/should I do!? I’d probably hire the person and fire one of my weaker employees, I get a “free-upgrade” and unemployment is still 10.2% climbing, even-though thousands are falling off every month!

Posted by Ed753 | Report as abusive

If Obama continues his keynsean policy, we WILL have long term unemployment. That’s the theory. Higher taxes –at all levels–and higher spending will do that as we found out from 1933-1947.

Posted by John Schuh | Report as abusive

[…] JAMES PETHOKOUKIS: Why the U.S. may have a long-term unemployment problem. […]

Posted by Instapundit » Blog Archive » JAMES PETHOKOUKIS: Why the U.S. may have a long-term unemployment problem…. | Report as abusive

Guys, this is a perfectly logical development. Europe has had a long term unemployment problem since the seventies. Why? The welfare state drives up labour costs, forcing everyone to use less labour. low-qualification jobs are the first to go. The more you try to be like us, the more you will share in our problems. this European for one would be sad to see the US go our way.

Posted by Bernard | Report as abusive

There will be plenty of jobs volunteering to push Obamas agenda but at least you’ll have plenty of time on your hands since you won’t be working. Then when you have no income pushing for socialized healthcare and a minimum wage green job might be appealing.

Posted by bandit | Report as abusive

“Plenty of jobs out there” – this depends on the meaning of out there. As the cost of labor continues to rise in this country job will continue to flow overseas. Where once we had production jobs leaving we now have engineering design and test going going to the Far East.”Right place and right time” – this reamins true in much of life. Not much you can do about this rather than be prepared and being able to recognize it when it comes along.”who you know, ass you’re willing to kiss” – see “right place- right time” above. When an opening exists I prefer a candidate that is referred by a current employ rather than hire someone on the strength of their resume. References given by a candidate are useless as he will only list those with something positive. Previous companies will not comment due to legal jeopardy. They will confirm dates of employment, however.If you fit the right demographic; minority, female, you go to the front of the line. However, if you don’t work out it is hard for a manager to get rid of you. So HR pushes the candidate to meet the company’s quota but managers remain reluctant.Gone are the days when a manager could take a chance and see if things work out.”Hire well or manage hard.”

Posted by John | Report as abusive

12+ million working illegal aliens, 15+ million unemployed American citizens, you do the math.Granted, a lot of the jobs illegals are doing aren’t the best jobs, but I think most people would rather be doing something than doing nothing. Then again, I’ve seen illegals taking many decent paying jobs just because the employers can pay them a bit less.

Posted by Parad E. Makewater | Report as abusive

I trust all you young people and semi-competent types who so fervently supported Obama (what, 80+%?) are very happy with how things have turned out, job-wise.It’s going to get worse before it gets better. Small businesses, in particular, would be insane to hire now with everything that’s threatening them:1. Health “care”2. Cap-and-trade and other carbon/energy taxes3. End of the “Bush Tax Cuts”4. Possible VAT5. Another possible hike in the minimum wage6. “Card check” so they might get unionized7. Surtaxes on “millionaires”8. FICA/Medicare hikes9. Increased STATE taxes10. Other new regulationsand about 5 other things.Not to mention that if some of this stuff goes through, a LOT of productive people are just going to go on strike, whether 100% or just a big slowdown. We can hold out a hell of a lot longer than you can.

Posted by Chester White | Report as abusive

We’re on the way to having a long-term unemployment problem because Obama wants the country to have a long-term unemployment problem. He doesn’t give a rat’s backside about getting the current system back in running order, he wants to tear it down and fundamentally change our relationship with government – the more needy people there are, the more they “need” government to “save” them.

Posted by Jeff | Report as abusive

You may also have noticed recently that the quality of personnel in retail stores is getting better and better. What these deeply stupid economic policies are doing is squeezing out the middle class and polarizing America into two camps: the wealthy and those who are going to be enjoying–if that is the word–a lower standard of living for years to come. That energetic carriage trade entrepreneur will soon be a thing of the past. Obama? He’ll be making about $59 million a year once you tally up all his presidential perks. Greedy as hell. Free as a bird. Ain’t America great?Mufaso, you are living in a fantasy land. Received a whole lot of stimulus bucks, have you? Pray tell us where; we’ll help you redistribute them.

Posted by ahem | Report as abusive

Many of the traditional sources of employment have vanished. In this part of North Carolina, for instance, a laborer — either skilled or unskilled — could always find work in the textile, knitting, tobacco, furniture, farming or dairy industries. These jobs are now gone. And while construction contractors still need laborers, most of these jobs seem to go to immigrants. Three factors account for this dramatic change. One is the availability of cheap labor overseas. Who can compete with child and slave labor? Second, government regulation drives up costs and discourages capital investment. Uncontrolled immigration, the third factor, has allowed a flood of workers willing to work for far less, and live less well, than US citizens to flood the labor market.

Posted by Tom | Report as abusive

Mr. Pethokoukis is correct in his summation. I live in Metro Baltimore. Most of my neighbors are small business owners and the 3 reasons they give for not hiring more people at the moment is1. Government seizure of health care…and the soon to skyrocket costs associated with it.2. Possible passage of cap and trade that will immediately raise the costs of doing business with it’s associated new taxes and fees.3. Rise in the minimum wage that puts pressure on all those who make (even slightly more) than that to get raises.When you add these three things together what do you get? An economy that will spiral further into depression. Unfortunately, “the powers that be” are following a Keynsian model of economics that says you must spend more, more, more! in order to leverage an economy out of depression. Unfortunately, this is a flawed model. FDR’s efforts at Keynsian economics stifled the economy in 1934/5 when it was just beginning to emerge from the Great Depression (WW2 got the world out of the depression, not Keynsian Economics). Nor will that model work now.Had the “stimulus package” actually been targeted at infrastructure projects on the whole, it might have been much less of a failure than it has. Unfortunately, the vast bulk of it has been spent of issues that have had zero impact on the economy (direct payments to states, medicare supplement payments, etc). Thus it’s direct impact has been…negligible.Additionally, a spinoff of that has been to suck funds from the non-government credit market by taking funds that would have gone to business in the form of loans, both to small business (which needs loans in order to produce goods and services) as well as large companies (who need it for the same things, just on a much larger scale). Thus, those funds were syphoned off into long term government bonds and are now as unavailable to business as if they didn’t exist.Unemployment will continue to rise until late 2010, and won’t reach the peak employment levels of 2007/8 until 2013 or later.

Posted by Rich Vail | Report as abusive

You cannot have more employment if you hate employers and are waging a disastrous war on the private sector.We can’t all work for the government.

Posted by George Bruce | Report as abusive

“That energetic carriage trade entrepreneur will soon be a thing of the past.”Right you are, Ahem. There was an article in Slate a while back – the lefty commentator Michael Lind was expounding his theory about opposition to Obama’s grand plans being motivated mainly by racism. Near the end, he let something slip: Since many small-business owners oppose massive social-welfare schemes (along with their annoying habit of often voting Republican), maybe what’s needed is…fewer small businesses! Let’em work for Walmart or the government!Moral of the story: if you’ve been thinking Obama’s hostile to small business, you’re not imagining things.

Posted by Jeff | Report as abusive

Just watched Question Time on BBC, and I had to laugh. One backbencher was asking if the PM would ensure/assure that a fair share of new government (i.e. public sector) jobs would come to her district.They actually called government-created payrolls, paid by non-government worker’s taxes, jobs.Any new government job (and get ready for tens of thousands under Obamacare) is parasistic and unsustainable. A first year economics minor knows that.

Posted by jimmy | Report as abusive

The more government interferes in our economy, the more negative the impact. This is a simple lesson that our reps in Washington have yet to grasp. They pass more rules and regulations that stifle what should be a free market and then complain that “capitalism doesn’t work”.We need a regime change in Washington. One that has common sense as its’ foundation. We need politicians with real world experience, not academics with pie-in-the-sky theories that don’t work.

Posted by BackwardsBoy | Report as abusive

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Posted by capital loans | Report as abusive

Does anyone have a handle on the employment black market? I’m talking about under the table payments, no benefits, all temporary. Small companies still need help. I think they’re getting help any way they can without having to jump through all the hoops.

Posted by Funky | Report as abusive

In addition we have been forced to absorb millions of illegal immigrants. A significant number of illegal immigrants have few job skills and poor fluency in English. They require billions in services every year from the government but provide only a fraction of that back in taxes.

Posted by tyree | Report as abusive

Jobs exist when workers, who are willing to work at a wage that allows an employer to anticipate a certain profit by hiring the person, are available. The labor market works like every other market. Lower the cost of labor and by eliminating gov. mandates, leveling the playing field between management and unions and stop paying people to not work (welfare, extended unemployment)for extended periods of time and jobs will be there.PS. if you say you can’t afford to live on less than what you used to make than you need to stop making long-term spending commitments until you are sure you can keep them without dipping into someone else’s pocket. I do.

Posted by Ed | Report as abusive

PelosiCare is a Budget Buster and a Job Killer.It’s worth repeating over and over again.

Posted by J | Report as abusive

Just lost my job of 32 years along with 62 others in my department.Our job losses were DIRECTLY attributable to impact on the business from new federal regulations enacted under the Obama/Pelosi/Reid administration.Hope for change, VOTE for change… and soon.America can’t take much more anti-business/anti-competitive/anti-weal th idiocy from Washington and the leftist nannies running NGO’s.

Posted by Doc | Report as abusive

[…] 3, 2009 Posted by taoist in Obama. Tags: Democrats, Government, The Economy, Unions trackback Does it? Instead, it seems to be about (what else, with Obama?) unions, and more government and […]

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