Structural bifurcation vs “recovery”.
May 9, 2010 § Leave a comment
Let’s look at the perspective .Quotes Pasted from <http://economistsview.typepad.com/
Calculated Risk notes that the long-term unemployment problem isn’t going away anytime soon:
But look at the reasons given.
Duration of Unemployment, by CalculatedRisk: This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories as provided by the BLS: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.
Note: The BLS reports 15+ weeks, so the 15 to 26 weeks number was calculated.
This really shows the change in turnover – there was more turnover in the ’70s and ’80s, since the ‘less than 5 weeks’ category was much higher as a percent of the civilian labor force than in recent years. This changed in the early ’90s – perhaps as a result of more careful hiring practices or changes in demographics or maybe other reasons – but if the level of normal turnover was the same as in the ’80s, the current unemployment rate would probably be the highest since WWII.
What really makes the current period stand out is the number of people (and percent) that have been unemployed for 27 weeks or more. In the early ’80s, the 27 weeks or more unemployed peaked at 2.9 million or 2.6% of the civilian labor force.
This treats all the employed/unemployed as a kind of soup of equally affect able parts, subject to the winds of fate. The underlying idea is that "the economy" will hire on comeback. But another view is that the existing corporate structures have decided to make do with less in order to increase profit, and that the way to do this si through that old combination of outsource, automation and making existing folks work harder to keep their jobs (a kind of musical chairs.). It may be that this restructuring is what will keep unemployment from moving up very far. It is deep, not cyclical. The financial powers in the country want the economy to look like it did, but with fewer workers. That increases profit (or keeps it from decreasing) while decreasing payroll.
It is worth repeating some of the comments Atlanta Fed President Dennis Lockhart made in March:
There are two key types of match inefficiency. One is geographic mismatch. In 2008, the percentage of individuals living in a county or state different than the previous year was the lowest recorded in more than 50 years of data. People may be reluctant to relocate for a new job if the value of their house has declined. In addition, many who would like to move are under water in their mortgage or can’t sell their homes.
The second inefficiency is skills mismatch. In simple terms, the skills people have don’t match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs.
But both of these would fit an economy with just low demand, demand that can come back. But we don’t have such an economy. The language of recovery is great for those who are recovering, those inside the structure of production and profit, but for those now outside there is not and will not be a place in the new musical chairs. Those whoa re confident are confident about the fact that they are in, "safe", while the rest are byr-bye.