The Grand Illusion

The Obama administration is more inclined to public relations than hard-headed pragmatism in dealing with unemployment.


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Still, can't we take comfort in headlines celebrating the decline in unemployment to 7.7 percent? Not really. If you add in all the unique categories of people not included in that number, such as "discouraged workers" no longer looking for a job, involuntary part-time workers, and others who are "marginally attached" to the labor force, the real unemployment rate is somewhere between 14 and 15 percent. No wonder it has been harder to find work during this recession than in previous downturns.

Though last month we theoretically added 236,000 jobs, these numbers are misleading, too, because so many of the jobs are in the part-time, low-wage category. So the backdrop to the most recent job numbers is the fact that multiple job-holders are up by 340,000 to 7.26 million. In essence then, all of the "new" positions are going to people who already are working, mostly part time. It is clearly more important to create jobs for people who aren't. Other aspects of the jobs picture deteriorated, too. The pool of people unemployed for six months or longer went up by 89,000 to a total of 4.8 million, and the average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks.

Moreover, the decline in the unemployment rate to 7.7 percent is shaky. It reflects the departure from the workforce of some 130,000 individuals. A change in the denominator makes the unemployment numbers look better than they are. The labor force participation rate, which measures the number of people in the workforce, also dropped to around 63.5 percent, the lowest in more than 30 years. The workweek remains short at 34.5 hours. Quite simply, employers are shortening the workweek or asking employees to take unpaid leave in unprecedented numbers, and these people are not included in the unemployment numbers.

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Clearly, the rate of job recovery has slowed drastically. Typically it takes 25 months to reach a new post-recession peak in employment, but today we are over 60 months away from that previous high, and we are still down 3.2 million jobs. We need between 1.8 million and 3 million new jobs every year just to absorb the labor force's new entrants. At the current rate, we will have to wait seven years to restore the jobs lost in the Great Recession, and we will need 300,000 or more hires every month to recover substantially above the current levels. The prospects for that are gloomy, since employers now feel they can do with fewer workers. Over 20 percent of companies say that employment in their firms will not return to pre-recession levels.

In the face of these figures, the government is just whistling in the dark. The programs it has announced are sensible, but don't do anywhere near enough to plug the gap in workers needed with skills in science, technology, engineering and mathematics – the best way to deal with the threat of a big permanent underclass. Nor is there any sense of a vigorous follow-through on multiple well-intentioned programs. We are told we live in an accelerated world, and so we do in communications. But when will we see reform of a patent system that imposes long delays on innovators and inventors and entrepreneurs seeking approvals? It often takes two years to obtain the environmental health and safety permits to build a modern electronic plant, a lifetime in the tech world.

A dramatic consequence of the inertia is that our trade in high-tech products has gone from a $29 billion surplus to a $60 billion-plus deficit.

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When employers can't expand or develop new lines because of the shortage of certain skills, the employment opportunities for the less skilled are restricted. Government must restore and multiply funds for training programs, especially vocational training and postsecondary education. And it must support every program to strengthen science, technology, engineering and math in high schools and at the university level, as well as broadening access to computer science. Until we get such programs properly underway, we should increase the number of annual visas for foreigners skilled in science and technology. They are not job destroyers, as nativist sentiment suggests. They are job creators, and not only that. They are job multipliers. Barring their entry or residence means they will compete against us in the industries that are both growing and competitive. It is astounding that we attract the brightest and the best brains to our universities, the world's best, and then send them packing. We must re-conceptualize immigration as a recruiting tool and open the door to the skilled and the educated. It is disappointing that so soon in a new administration, decisively elected, both party leaderships seem still stuck in a campaigning mode. It isn't just that agricultural companies lack the labor to pick crops of citrus fruits and onions, but that we are stupidly cutting off one of the great sources of innovation. About half the companies in the Fortune 500 owe their origins to the ideas and enterprise of immigrants. Diversity breeds ideas. Look at the history of America.