While the Great Recession has been officially over for four years, the jobs crisis goes on and on. Unemployment hit its peak of 10.0 percent in October 2009, but remains as high as 7.6 percent in May 2013. Long-term unemployment has been a special scourge, reaching almost twice its previous postwar peak (from 1983), as shown by data from the St. Louis Fed:
As we can see, the average length of unemployment is almost 40 weeks, little below its peak, while median unemployment has fallen about five weeks from its peak, although it is up a full four weeks from January to May.
As Chad Stone pointed out last week, this is largely the result of a huge shift in government focus from unemployment to debt beginning in 2010. Austerity, particularly noticeable at the state and local government level, has left employment growth barely keeping up with population growth.
As American Enterprise Institute economist Kevin Hassett told Dylan Matthews (h/t Economics Daily Digest at Daily Kos), "when you look at the negative effects of long-term unemployment, they just get disconnected, and we have a hard time reconnecting them. These are folks who are going to be a serious spending challenge for government throughout their lives."
This is the concrete reality of what it's like to have mean unemployment duration of about 40 weeks. They become less and less employable, have worse health problems, lose their home to foreclosure, etc.
What do we do about it? In the Great Depression, we had government directly employing the unemployed through the Works Progress Administration and the Civilian Conservation Corps. My father-in-law was in the CCC, and we display his discharge papers at home. I believe the country should do something similar today.
The funny thing is, so does Kevin Hassett! Describing long-term unemployment as "a national emergency," he argues in his interview with Matthews that we should consider direct government jobs as one of the things we should experiment with that would have better bang for the buck than the 2009 stimulus package.
I do disagree with some of his ideas, like turning Detroit into a tax haven. Aside from the fact that being a tax haven didn't do much for Nevada's unemployment during the recession and beyond, the basic idea that Hassett mentions of enterprise zones has not shown itself to be successful in practice, as I discuss in the context of Governor Andrew Cuomo's proposal for "Tax-Free New York."
Still, it is noteworthy that a conservative economist thinks we need to have direct government employment. His analysis of the long-term harms to the individual and to government tax revenue and spending from long-term unemployment is quite correct, and it's time to do something that will actually address the problem.
Kenneth P. Thomas is professor of Political Science and fellow in the Center for International Studies at the University of Missouri-St. Louis. He is the author of "Competing for Capital: Europe and North America in a Global Era" and "Investment Incentives and the Global Competition for Capital." He blogs at Middle Class Political Economist.
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