Ongoing Developments in the Unemployment Conundrum

While the US unemployment rate for November unexpectedly fell to 8.6 percent from 9 percent in October, recent jobs numbers may reflect deeper systemic problems in the nation with respect to labor and economic activity. According to the Los Angeles Times, "economists viewed the latest jobs report as largely positive" amidst a slow recovery. Even so, economists "cautioned against reading too much into the big drop in the jobless rate, given that it reflected a contraction in the labor force as much as job gains."

Where the markets seem to have responded positively to recent jobs numbers, some commentators think that there is reason for concern. With respect to the contraction in the labor force, a recent post on Stephen Dubner and Steven Levitt's Freakonomics blog written by Daniel Hamermesh, a US economist and professor, highlighted a striking fact from the jobs report, i.e. "the continuing, constant and historically high share of unemployment accounted for by the long-term unemployed, around 43 percent". Where political partisans in Washington may bicker about the unemployment situation in the US, given the loss of work utility from long-term unemployment, Hamermesh suggested that the current state of affairs is precarious.

Hamermesh argued that long-term unemployment is bad for American society because (1) the burden of unemployment "must increase the longer one is unemployed" and (2) fewer people are affected by concentrated unemployment thereby diminishing the hope for political solutions. Hamermesh then stated that "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."

In addition to Hamermesh's insights, Stephen Dubner posted an entry on the Freakonomics blog Monday discussing how more Americans are quitting their jobs. Dubner: "More resignations would seem to indicate an improving economy." In the post, Dubner cited an interview where he spoke with former Labor Secretary Robert Reich. Reich: "The government doesn't have good data [on why people quit their jobs]... That's a subjective issue... These days when the economy is still bad, struggling to get out of the gravitational pull of the Great Recession, most people who leave their jobs are still not leaving because they have great, wonderful opportunities elsewhere... They're leaving because they have no choice, their employer is basically kicking them out."

On this topic, interestingly enough, MarketWatch's Brett Arends recently discussed how government numbers on the unemployment situation should not be trusted. Arends: "The unemployment situation is far, far worse than the government is telling you. Forget the official jobless rate, 9%. It's meaningless. Even the so-called 'underemployment' rate doesn't tell the full story." Arends' comments posit an interesting thought when we consider the unemployment rate going from 9 percent to 8.6 percent: perhaps sometimes appearances are reality.

Taking the above into account, one cannot help but find himself in quite a precarious and confusing position of trying to figure out the status of the US labor market. Where commentators may argue that we should not rely on jobs numbers provided by the government, one has to wonder whether the monthly unemployment rate is more related to political realities than actual reality. With the specter of underemployment and individuals leaving the labor force altogether, what really does the unemployment rate mean at this point? And even further from the unemployment rate, what can our current information tell us about the labor market and how to decrease unemployment? To say the least, the answers to the aforementioned questions appear to be quite nebulous and I think it is unlikely that we will find any pragmatic solutions to high unemployment in the immediate future. Given various factors including an aging population, changing demographics, changing cultural attitudes, and changes in educational traditions, as I have previously written, "There may actually be no solution to the unemployment problem in the US."

This unemployment conundrum intensifies in gravity when you consider the prospects of income inequality and generational differences in employment. TheStreet.com recently featured a story from Alix Steel regarding the unemployment problems of young people as older Americans refuse to retire. Steel: "A big reason young people can't find jobs right now is their parents." As baby boomers are staying in the workforce longer and "clogging the job pipeline", there are less job opportunities for young people. This is a major problem when you begin considering the long-term implications of unemployment, i.e. a "lost generation" of civilians who have not had the opportunity to work during what should be some of the most productive years of their lives. According to Steel's report, baby boomers are working longer at the expense of their children because baby boomers are living longer, they are healthier, jobs are less physical, and because of the Great Recession.

Where we can recognize that youth unemployment is increasing as older people remain in the workforce, it is significant to note that youth unemployment is now a global problem stretching across the world. If we look at France to Spain to Egypt to South Africa, the pandemic of youth unemployment is something that's going on across the globe. As such, we have to put the issue of unemployment into a global context.

Now, anyone who has followed my stories on Benzinga knows that I tend to be bearish when it comes to economic matters, but to say the least, I think the current unemployment predicament across the world goes beyond bull and bear markets; rampant youth unemployment is a globally systemic issue. Where one may want to blame the government or baby boomers or technology, I think the issue transcends sheer economic factors; one might say that the issue cuts to the heart of American culture and the course of humanity given its growth in technology and medicine. Of course, to say that current youth unemployment cuts to the core of the human phenomenon is a heavy statement, but this is a global problem we're talking about.

Nevertheless, given the horrible effects of unemployment on societies and individuals, one has to wonder how this unemployment conundrum will evolve in American society. One more-or-less pragmatic option would be to levy taxes on those who have jobs in order to support those who cannot work via unemployment benefits and government work. Another option that comes to mind would be to levy a tax on corporations that outsource work to foreign countries thereby decreasing the pool of jobs in America. Of course, there are more counter-productive options to deal with unemployment including but not limited to a rise in fascism or communism, but most people would probably want to avoid entertaining such options if possible.

Aside from government intervention, the Austrian School side of me thinks that perhaps in a free market, the society itself would be able to work out unemployment in the market. I'm sure an Austrian School economist (in the spirit of Henry Hazlitt) could lecture on how government intervention should be avoided and how technology and a larger workforce do not contribute to unemployment -- and how we should let the market take care of unemployment issues. However, ours is not a problem of theoretical economics; this is a real problem that we have to approach realistically. Given the reality of the situation, to wait and let the market try to work out the problem seems to be a bit apathetic and lethargic, to say the least.

In the end, unemployment is here; yes, it may be at 8.6 percent according to government statistics right now, but it's not going anywhere in the immediate future. The rub appears as young people across the world look at the situation and see that there is nowhere to escape to -- youth unemployment is a global problem. Most young people in the US cannot simply travel on a boat or a jet to escape to someplace with a better employment situation; there is nowhere to run. Even further, those who are unemployed today are going to be less marketable in the future. As one reader named Cor Aquilonis commented on Hamermesh's post, "The long-term unemployed are suffering tremendous damage 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."

All this dialogue on the topic of unemployment comes as the value of having a job increases -- so as to make it appear that jobs are very scarce, or even rare, for some people. Various posted openings online that are not actually real openings or "Now Hiring" signs on stores that really aren't hiring are bending individuals' perceptions of having a job and seeking out meaningful work. The "great American job search" comes with a hefty cost for citizens in terms of a limited amount of paper, time, energy, and resources. Far from the common perspective owing to American media, culture, and corporatism, I do not believe that getting a job should be like launching a rocket into space. I'm not saying that having a job is a right per se, but being able to find a job should not be like looking for the holy grail.

The bottom line is that with or without the unemployment numbers, the scarcity of jobs compromises a society's perspective on labor. In the end, work is something so fundamental to life and living that for a society to not have it and to not have such activity fostered raises questions on the humanity of any given society. Even further from the humanity of a society, I would argue that on an economic level a lack of jobs and work raises questions regarding the legitimacy of a society going forward. I would go so far as to say that rampant global youth unemployment in this time period raises substantial questions on the nature and course of the human species, i.e. the viability of our species going forward on this planet and in the greater universe. As I alluded to in the article "East of Eden: Between Land and Labor", contemplating a society where there are no jobs borderlines the realm of comedy. I mean, seriously, have you ever read the history behind the island of Nauru with its unemployment rate of 90 percent?

Now, I can understand that there are going to be limits to labor force participation within a population and that not everyone in a society is going to be physically or mentally able to work, but still, if there are no jobs and no work, what are people doing? How are they eating? How are they drinking? What is a society if there's no work to be done, no jobs to be gained, no items to be produced? That can only go on for so long!

One way or another, work is something fundamental to the human experience; given the nature of human economic activity, it makes sense that the market would offer individuals the ability to work; if the market is not offering individuals the ability to work, then something is seriously wrong systemically. We have to find some way to let the market create jobs and get people working as soon as possible. And at the end of the day, if there is a way out of this global unemployment conundrum, I assure you that most likely we will have to work to find it.