Mort Zuckerman: The Jobs Picture Is Far Worse Than It Looks

As in the Great Depression, millions are suffering unemployed—but this time they're invisible

February 28, 2013 RSS Feed Print

We think of the iconic images of the Great Depression as representative of a uniquely miserable period, long vanished from American history. The bread lines and soup kitchens of those abnormal times have gone. So, too, has the sight of thousands of men (there were very few women among them then) waiting all day outside a factory in a forlorn quest for work.

But they're there still, in the many millions across the country—little changed in their total since the 1930s: 12.3 million today are fully unemployed, compared to 12.8 million in 1933 at the depth of the depression. The difference is that now they're invisible, because we've organized relief differently. In our "recovery," the millions are being assisted, out of sight, by the government, through unemployment checks, Social Security disability checks, and food stamps. More than 47 million Americans are in the food stamp program, some 15 percent of the total population, compared with the 7.9 percent participation in food stamps from 1970 to 2000. Then there are the more than 11 million Americans who are collecting checks from Social Security to compensate for disability, a record. Half of them have signed on since President Obama came to office. Twenty years ago, one person was on disability for every 35 workers; today, the ratio is one for every 16. Such an increase is simply impossible to explain by disability experienced during employment, for it is inconceivable that work in America has become so much more dangerous. For many, this program is another unemployment program, only this time it is without end.

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But the predicament of our times is worse than that, and worse in its way than the 1930s figures might suggest. Employers are either shortening the workweek or asking employees to take unpaid leave in unprecedented numbers. Neither those on disability nor those on leave are included in the unemployment numbers. The labor market, which peaked in November 2007 when there were 139,143,000 jobs, now encompasses only 132,705,000 workers, a drop of 6.4 million jobs from the peak. The only work that has increased is part-time work, and that is because it allows employers to reduce costs through a diminished benefit package or none at all.

Altogether, the broadest measure of unemployment today is approximately 14.5 percent, way above the 7.9 percent headline number you read about. The figure encompasses not only the unemployed but also the 8 million people who are employed part time because their hours have been cut back or because they have been unable to find a full-time job, and the more than 7 million people who have either stopped looking for work or are only "marginally attached" to the labor force.

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Indeed, the labor force participation rate, which measures the number of people in the workforce and reflects discouraged workers who have dropped out, has dropped to the lowest level since 1984. If it were not for the dropouts, the formal unemployment rate would be around 9.8 percent. If the percentage of people looking for work now were the same as on the day that Obama was elected, the unemployment rate would be almost 11 percent.

Sometimes the announced employment numbers are not understood. January was supposed to have created 157,000 jobs, provoking relief and even enthusiasm. But that news was based on seasonally adjusted numbers. The real unadjusted figures show that 2.8 million jobs actually disappeared in January, slightly more than the 2.6 million lost last January. This new number of 157,000 was cheered, though it was less than the 311,000 of January 2012, because most commentators didn't understand the effects of seasonal adjustment.

[See a collection of political cartoons on the economy.]

So there is no solace in the statistics. One study by researchers at the American Enterprise Institute and the Center for Economic and Policy Research shows that a worker between the ages of 50 and 61 unemployed for over a year has only a 9 percent chance of finding a job in the next three months and only a 6 percent chance if he or she is 62 years or older. At the current growth rate, it will take almost seven years to restore the jobs lost. Jobseekers are only one third as likely to find a job as they were seven years ago, and a record number of households have at least one member looking for a job, which affects everyone. The recession has clearly shown that employers now think they can make do with fewer workers. Over 20 percent of companies now say that employment in their firms will not return to pre-recession levels.

Imagine the sense of futility that must overcome people who month after month fill out forms, go for interviews if they are lucky, and end up as they started with nothing to show, because there are approximately 3.3 unemployed workers for every job seeker, according to the Economic Policy Institute. Millions of families are one layoff or one medical emergency away from going into bankruptcy. It is harder to find work today than it has been in any previous recession, and most of the newly available jobs don't match the pay, the hours, or the benefits of the millions of positions that have vanished during this recession.

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It typically takes 25 months to close the employment gap from the employment peak near the start of the downturn, yet this time, over 60 months after employment topped out in January 2008, non-farm unemployment is still more than 3 million jobs below where it started. The great American dream is no longer a house in the suburbs. It is now a secure job—and any job will do.

The growth rate of 1.5 percent has been tepid, for it is only about one half what is typical in the fourth year of a recovery. That is primarily because the recovery is not built on real job creation but on record monetary easing by the Federal Reserve and record stimulus by the federal government. The result is slack in the U.S. economy. We are coping with a near 6 percent output gap, which is as high as we have ever gotten even in the most severe recessions.

Paradoxically, hundreds of thousands of employers say they can't find workers with the skills they need in science, technology, engineering, and mathematics. Education means skills, skills bolster productivity, and productivity is the key to economic success. So this shortfall in education is the economic equivalent of a permanent national recession.

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Clearly overdue is a plan to recover from the recovery. The government must take the lead and arrange the marriage of private and public capital to regenerate real growth. The way to do it is the old-fashioned way we used to do it, by investing in projects that enrich our productive capacity and employment through the well-known multiplier effect. Not to do that is to inflict still further damage on the economy. How long can we put off repairing and renewing? The investments should be tolled through user fees so as to produce revenues to service a good part of the debt.

There is so much to do to get America back to the powerhouse it was:

Invest in the national electricity grid and in a high-speed internet grid; in bridges, roads, tunnels, airports, and high-speed rail; in fracking; in education for science, technology, engineering, and math; and in training programs tied to unemployment.
Add thousands of annual visas for foreigners with science and technology skills to work here, while allowing international graduates to stay rather than return home or settle elsewhere to compete against us.
Simplify or abolish the regulations that foreign companies cite as the principal impediment to investing and creating jobs here.
Broaden our tax base and get rid of loopholes, deductions, and credits and the inherent corruption related to them so as to enable lower marginal tax rates.

[Read the U.S. News Debate: Is Obama's Corporate Tax Plan A Good Idea?]

Ordinary Americans are looking for leadership and renewal. They know that a job is the most important family program, the most important economic program, and the most important national program that America could put in place, and, by this standard, we have failed.