Friday, November 07, 2008

Unemployment Increases

Interrupting the election euphoria is the economic news. The NYT has a series of graphs that show information about unemployment since 1990: The Labor Picture in October. The graphs will open in a new window.

Of particular interest to me are the graphs on the unemployment rate, job losses in sectors (note how the professional services sector is being affected), part-time employees looking for full time jobs (under-employment), and decreases in weekly wages.

In the accompanying article, Jobless Rate at 14-Year High After Big October Losses, there is more information about how the losses have occurred (my emphasis):

Above all, the latest monthly snapshot of the job market reinforced how the economy remains gripped by a potent combination of troubles — plunging housing prices, tight credit and shrinking paychecks — with all three operating at once in a downward spiral.

Companies have been hiring tepidly and laying off workers throughout the year as business has slowed, while cutting working hours for those on the payroll. Millions of Americans accustomed to borrowing against homes to finance spending have lost that artery of cash as home prices have fallen.

Wages have effectively shrunk for most workers, as rising costs for food and fuel have more than absorbed meager increases in pay. That has further crimped American proclivities to spend.

In October, weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew just 2.9 percent from October 2007, well below the rate of inflation.

The health care industry and public schools were the only sectors of the economy that showed more than notional growth last month. Otherwise, the losses were deep and broad. The troubles in the auto industry led to thousands of layoffs at car dealerships and factories that produce car parts. Tens of thousands of workers at manufacturers and construction companies lost their jobs.

Janitors, administrative workers and temporary employees were hit hard, with 57,000 jobs lost in October. Even general merchandise stores, which have seen an increase in business because of lower prices and more budget-minded consumers, laid off 18,000 workers last month.

The 284,000 jobs lost in September was the biggest monthly toll since November 2001, in the aftermath of the terrorist attacks in New York and Washington.

The economy never really recovered from the 2001 drop. Employment was heavily driven by the real estate bubble, especially here in California. Construction was home construction, retail was very much invovled with home furnishings and home improvements, consumption was financed by home equity cash-outs, and so forth.

The housing bubble has disguised the long-term effect of falling real wages with the home ATM making up for the shortfall in paychecks. While the main focus on the bubble has been on exotic mortgages, less sustained attention has been given to refinancing. A significant number of these transactions will be recourse loans, debts that cannot be discharged with a foreclosure but which will stay with the debtor, dragging down both personal and more widespread economic recovery.

Whatever real value stored up in housing has been exhausted and then some. It's not enough to put people back to work if those jobs are non-union, part-time, and low wage. A reduction in consumption and a lower rate of growth are not inherently bad things if overall economic security is improved. Can we all stand to drive older vehicles, have fewer things, and live in smaller digs? Probably, but austerity for the working class and poor will not solve the structural problems of chronic underemployment and incremental impoverishment that are creeping their way up the socio-economic food chain.

The Wall Street bailout is not even a start at addressing the structural problems afflicting the real economy.



Dhyana said...

I just read that Obama is going for an "immediate stimulus package". He figures that if the first one didn't take, maybe the second one will. Unless Obama makes a comprehensive package that deals with the economy, like Bill Clinton pushed in 1993, it will be another Pelosi package that does more damage than good because it's more borrowing by the US Treasury with no good economic lasting effect.

Koshem Bos said...

It seems to me that you are advocating the European model of workplace and social rights. There few people make the American minimal wage. Workers come with health insurance, generous unemployment insurance, annual vacations are longer than a month, consumption is low, and people live in apartments rather than houses.

So far there was strong resistance to any item on the list and I don't see that we can accomplish much in the near future.