article

12.03.11

Jobs Report Shows Structural Unemployment Is the Real Problem

Friday's labor report was seized upon by both Democrats and Republicans. But Zachary Karabell says it shows that structural unemployment—not monthly ups and downs—is the real problem.

The official jobs reports released Friday by the Bureau of Labor Statistics had something for everyone. It gave optimists hope and pessimists ammunition, and it provided ballast for President Obama and the Democrats while simultaneously providing the Republicans with more fuel for their assault on the White House. Two things are clear, however: this trend may help Obama politically, and it is unlikely to result in any meaningful change in a structural unemployment problem in America that many people now recognize but which is essentially denied by our political class.

For those who see economic activity in the U.S. slowly stabilizing and moving ahead, the report offered the figure of 120,000 new jobs added, along with upward revisions to prior months, along with a headline unemployment rate that dropped sharply from 9.1 percent to 8.6 percent.

For those who believe that the statistical entity know as the U.S. economy is stagnant and showing no signs of life, the report offered the sobering fact that wages remain flat, the pace of job creation isn’t enough to employ all those who enter the workforce every year, and the only reason that the headline rate went down was because more people simply gave up and ceased looking for jobs. In the real world, that makes them unemployed, possibly in despair, and in grave economic trouble; in the statistical universe of government figures, they simply cease to exist as part of the workforce.

Each side reacted accordingly: the Democrats, the White House, and assorted economists hailed the report as a sign of stability and recovery and pointed to various other data showing modest strength in economic activity. They also said that the report added urgency to the need to continue policies such as payroll-tax breaks and extended unemployment benefits to stimulate further activity and deal with the plight of many millions still unemployed. The Republicans, ranging from Speaker John Boehner to presidential candidate Mitt Romney, assailed the report as proof that three years into the Obama administration, joblessness is chronic, spending has failed, debt has soared, and America is at sea.

This angry discordant debate makes it seem as if we could rectify this problem just by electing the right people. Would that it were so.

For Obama, however, the report and the numbers are not only good but maybe essential for his reelection. In the first weeks after he assumed office in January 2009, Obama demanded a stimulus program of nearly $800 billion on the promise that the result would be “3.5 million new jobs.” Nearly three years later, there are perhaps 2 million new jobs and the labor force has shrunk. While the White House has tried, it is hard to campaign on the platform that things would have been much worse had those actions not been taken. People do not live in the hypothetical, and while the argument that the situation would have been direr in the absence of the stimulus may be true, “it could have been worse” is not a vote-getter.

Given that economic growth isn’t likely to be much more than OK next year, Obama needs proof that the employment situation is improving steadily in order to campaign on his record. Sure, he can borrow from Harry Truman's 1948 playbook and attack Congress for inaction and the wealthy for taking more than their share. But being able to point to his own record would be better still. In that sense, the official statistical picture of a declining unemployment rate is a much-needed wind at his sails.

That said, there is nothing about the underlying data of this report and of employment in general that should suggest anything but chronic, structural, and deep unemployment issues in the United States that remain unaddressed and unresolved. A statistic that goes down because more people are out of work and no longer even have the will to look for a job is a looking-glass number. And people know it—hence the Occupy Wall Street protests, amorphous though they are, and strong populist strains in the Republican Party, not to mention survey after survey that finds Americans anxious about the viability of this system going forward. The political class and the public discussion continue to point fingers and assign blame for joblessness on bad policies.

This angry discordant debate makes it seem as if we could rectify this problem just by electing the right people. Would that it were so. That would be so much easier. Cut taxes, cut the deficit, raise taxes, spend moreif only some magical combination of those would suddenly create jobs. But that is not how it works. Current levels of joblessness are a potent mix of changing global patterns of manufacturing and technology, making many 20th-century jobs unnecessary.

This is an employment crisis not of college-educated women (just read into the data compiled by the BLS every month) who have an unemployment rate of barely more than 4 percent and decent wages. This is a crisis of men who did not go to college, who do not have the tools and never acquired the skillsknowing how to learnthat are so needed today. They have the skills to build homes that aren’t being built and to man the factories of yesterday rather than the high-tech lines of today. No set of Washington policies enacted in the near term will fix that. What growth there is in economic life comes from highly efficient business, not robust demand for goods and services.

Meanwhile, the political class offers only payroll tax breaks and extended stimulus, which are good for getting elected and pretty useless for job creation. Washington and the campaigns remains locked in battle over who is to blame combined with vague promises of a new era if only we get the politics right. But even with better short-term policies, why would the private sector create jobs when there is more than enough spare manufacturing capacity and muted demand, when government is shedding workers from payrolls, and when there is no indication of an uptick in demand?

What we do need is for Obama, or Romney, or the next great electoral hope, to stand up and say, “Many jobs that have been lost will never come back, anymore than telegraph operators and buggy whip manufactures did a century ago. Government cannot create those jobs, but it can be a constructive force in laying the groundwork for the new economy of tomorrow.”

Then, we need a Congress that will actually address unemployment and underemployment as a long-term challenge resulting from structural shifts and not just because of the greed and incompetence of Wall Street and Washington. And finally, we need to each of us accept that there is only so much government can do. That’s what we need, and that’s what this and every recent jobs report tells us we need. it is, however, unlikely that it's what we are going to get.