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So, why are the jobless numbers so high?

By Chris Farrell, Yahoo News
February 9, 2011

In this photo taken on on Thursday , Feb. 3, 2011, Job seeker Richard Phillips looks for a video post-production job opportunity at the Verdugo Job Center in Glendale, Calif. Finding a job remains a struggle 20 months after the recession technically ended. (AP Photo/Damian Dovarganes)

The job numbers are bleak.

Some 13.9 million workers remain unemployed 21 months after the end of the recession, according to the latest estimates from the Bureau of Labor Statistics.   Of those, 6.2 million people have been out-of-work for 6 months or more, and 8.4 million toil at part-time jobs. And few economic forecasters believe the nation’s unemployment rate — currently at 9 percent — will drop much below that level in 2011.

Just how broken is the great American jobs machine?

American companies have returned to record profitability, and, as President Obama pointed out in a speech to the U.S. Chamber of Commerce on Monday, they are sitting on $2 trillion in cash on their balance sheets.

Yet many remain extremely skittish about adding workers to the payroll. The economy added only 36,000 jobs in January, well off the 300,000-plus monthly pace that would be needed to absorb the unemployed and new workers entering the workforce. For instance, if the economy adds 321,000 jobs a month — the average monthly rate for the best year of the 1990s — the economy will reach its pre-recession employment level by May 2016, according to calculations by Michael Greenstone and Adam Looney of the Brookings Institution.

So why aren’t American companies doing more hiring, and what, if anything, can Washington do about it?

In his speech to the chamber, the president urged the assembled business leaders to work closely with his administration to strengthen American competitiveness, and he argued that they had a responsibility to do more to help create jobs at home.

(Obama’s olive branch to big business: Will it work?)

“But as we work with you to make America a better place to do business, I’m hoping that all of you are thinking what you can do for America,” the president said. “Ask yourselves what you can do to hire more American workers, what you can do to support the American economy and invest in this nation.”

But is it lack of responsibility or other factors that are getting in the way of stronger job growth?

With poll after poll showing that Americans’ top concern is jobs and the economy, Washington is awash in debate over what the best policies are to revive job growth. Since his State of the Union address, the president has been pressing the case for targeted investments in education, research and infrastructure in a bid to foster the innovation the U.S. needs to create jobs and remain competitive.

But GOP leaders scoff at those plans as a waste of taxpayer dollars and a misguided attempt by the government to pick private sector winners. From Speaker of the House John Boehner on down, Republicans argue that the best thing Uncle Sam can do is lower taxes, cut the deficit and get out of the way of companies trying to build thriving businesses.

The political divide between the administration and Republicans is widely known. Far less understood are the reasons for the crisis in the job market, and exactly why the picture has turned so bleak.

Yes, the past three years have taken an enormous toll. Many of the job losses were concentrated in three industries hammered during the 2007 to 2009 recession – construction, manufacturing, and retailing. Demand remains sluggish, and business managers are cautious about expanding operations too quickly.

But that’s just one reason for the dismal performance. The American economy has been faltering at creating jobs for the past decade, since well before the recession. Take private sector job growth, a key measure of the labor market’s health. The private sector added jobs at a rate of only 0.6 percent during the boom years of the 2000s. That’s a shadow of the 1.8 percent annual rate of private job growth in the ’90s and the 2.0 percent yearly pace of the ’80s, according to the Economic Policy Institute.

So what are the main culprits for sluggish job growth other than the recent recession?

Globalization and technology: At the top of most lists is the powerful interplay between globalization and technological innovation. Intense international competition for markets and profits has driven corporate America to focus intensely on boosting productivity—in other words, doing more with fewer workers.

Nowhere is that clearer than in traditional smokestack America. About 20 percent of private workers were employed in manufacturing, mining and public utilities in 2007. (That’s down from about 40 percent in 1970.) Now, the share of employment has fallen to about 13 percent. Yet companies are so productive that the U.S. remains the world’s largest producer of manufactured goods.

It isn’t only traditional smokestack jobs that have been lost, either. Many service and information workers became an expensive anachronism as technological advances offered new opportunities for slashing costs and improving economies of scale. Think about how many bank tellers and secretaries have been replaced by ATMs and voice mail — and that’s only a start.

Throughout the economy, many administrative, bookkeeping, call center, back office, and similar jobs have been lost to computers and outsourced to India and other emerging markets.  A world filled with smart computers, all linked via the Internet, wireless and other high-speed communication networks, has eliminated  whole job categories among the white collar crowd. “We are still underestimating the power of the information technology revolution,” says Bruce Yandle, economist at the Mercatus Center at George Mason University. “We’re substituting technology for labor.”

Education: There’s one other factor economists highlight: The education system has failed many young adults, especially in the K-12 years in inner-city and rural America.  . Most new jobs require some sort of college education these days. The modern workplace is a hostile environment for anyone with only a high school diploma, let alone a high school dropout. In 1980, college graduates earned roughly 40% more than their peers who held only a high school degree; today, that “wage premium” has grown to 84 percent.

Business may have the “Help Wanted” sign out, but the workers applying don’t have the right credentials. The troubling nexus between a lack of educational achievement and a high unemployment rate is especially concentrated among men. “To the degree that there is a structural problem, it’s concentrated at the bottom third of the male labor force,” says Stephen Rose, Research Professor at the Georgetown University Center on Education and the Workforce.

Of course, America’s education problem has been building over time. The growth in high school graduation rates has slowed since the 1970s. It now appears that America’s four-year high school graduation rate hovers around 69 percent, according to the Alliance for Excellent Education. Some minority groups do much worse: a mere 56 percent for Hispanics and 54 percent for African Americans. “There is certainly some structural unemployment in the economy,” says Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University. “But we can’t explain a 9 percent unemployment rate with structure. ”

Given those problems, what more can the government do to spur new job creation? The Obama Administration is pushing hard for more infrastructure projects, which typically draw support across party lines. (The AFL-CIO and the Chamber of Commerce put out a joint press release on Jan. 26 praising the president’s call for infrastructure investment.) But that traditional response may not hold when Tea Party conservatives are rebelling against fiscal spending and business-as-usual on Capitol Hill.

Considering the current state of politics in Washington today, any job creation policies ultimately seem to rest on one of the following four pillars:

Pillar 1: Economic growth – Robust economic growth creates jobs. The slow pace of growth as the Great Recession has ended is the single most important factor behind today’s high unemployment rate. Strong growth also would encourage businesses to invest the nearly $2 trillion in savings they have on their books; that, in turn would lead to more hiring, which will hike demand, and so on in a virtuous cycle. But the economy hasn’t reached that tipping point yet. “There isn’t enough oomph in the economy to get people back to work fast,” says Northeastern’s Bluestone.

Pillar 2: Tax policy – The federal, state, and local government policy for prodding business to hire is to avoid tax hikes, and to cut taxes where possible. That principle was at the core of the  package of compromises Obama reached with congressional Republicans during December’s  lame duck session. The deal, among other things, extended the Bush era tax cuts and reduced the payroll tax. From September 2010 to the end of 2011, businesses can also fully write off the cost of new equipment, a move designed to get them to speed up investing.  The administration also would like to permanently eliminate capital gains taxes on some kind of small business investments held for more than 5 years.

Pillar 3: Education – Job growth in the future will be in the parts of the economy that require at least some college education, such as health care. Even manufacturing jobs require higher degrees. For instance, in 1973 only 12 percent of workers in manufacturing had any college experience. That figure has swelled to more than 36 percent, according to data collected by the Georgetown University Center on Education and the Workforce. Similarly, some three decades ago two-thirds of workers in fishing, farming, and mining were high-school dropouts. Now at least a third has some college education. The sense is too few school-age kids are being prepared for the new world of work. Right now, most states and local governments are reducing, not hiking spending. “That will change when the recovery gets stronger,” Rose says.

No. 4: Clusters – Think Silicon Valley. Clusters represent a region’s leading innovative businesses supported by a network of producers, suppliers, investors, universities and related business. Colorado has a 1,500 company clean-tech cluster. The Twin Cities is home to the medical device industry cluster. Research shows that strong clusters tend to generate jobs. Perhaps more important, experience shows that clusters tend to attract bipartisan government support at the local level, says Lee Munnich, director of the State and Local Policy Program at the Humphrey Institute of Public Affairs. Ideology is less important on the local level when it comes to backing leading industries.

Copyright © 2011 Yahoo! Inc

22 Responses to So, why are the jobless numbers so high?

  1. Almandine

    February 9, 2011 at 11:33 pm

    Let’s get real. The jobless numbers are so high because people are out of work! Yeah, I know, you’re looking for the cause…. and you’re looking under the street light, because that’s where you can see best. You can blame the recession, globalization, outsourcing, lack of education, massive govt debt to be repaid, tax policy, etc., but the actual problem with businesses keeping their capital under lock and key is the overall “economic climate” that forebodes nothing but an ill-framed future.

    They’re scared shitless of Obamacare, cap and trade, oil drilling moratoriums, (clean) coal plant denials, all manner of EPA and other executive branch regulations, govt promotion of unions, govt takeover of businesses, devaluation if not replacement of the dollar, inflation, and any/all other assaults on their potential success that this administration can either cause or allow.

    The base cause, of course, is the socialist-in-chief who occupies the White House, whose policies are dedicated to proletarian control of not only the levers of power but monetary control, and eventually the means of production… which portends nothing but a Chavez-type system in which business is nothing more than an arm of the state, if allowed even that degree of independence.

    You wanted change you can believe (in) ??? Believe that.

    • Carl Nemo

      February 10, 2011 at 12:04 am

      Spot-on Almandine concerning the government quenching entrepreneurial spirit among those that would consider risking their fortunes on starting new enterprises. This includes bankers that provide the lending for such startups.

      We’re long overdue for a flat rate income tax and to chuck the IRS along with its 40,000 page interpretation of the basic law through the ‘code’.

      The government needs to go on a campaign to remove its tentacles from the economy as much as possible concerning business as long as it doesn’t jeopardize public safety or the environment; ie., Newt Gingrich for eliminating the EPA. The EPA has merit, but they need to eliminate EPA shenanigans that squelch industrial investment in America of which there are many on the books. The FDA being another.

      Seemingly our government every day in every way is dedicated to the destruction of our American way of life. To them there doesn’t seem to be any future in investing in “labor” which has taken a backseat to the now failing FIRE economy; ie, finance, insurance, real estate.

      http://en.wikipedia.org/wiki/FIRE_economy

      Carl Nemo **==

      • Almandine

        February 10, 2011 at 12:06 am

        I like the Fair Tax.

        • Carl Nemo

          February 10, 2011 at 12:16 am

          What would constitute a “fair tax”?

          To me taxes are a necessary evil in that there has to be some outlays for the maintenance of the state and societal decorum. You could only have a fair tax if there was continual oversight as to how the money was spent.

          The larger the entity supported by taxes, the less accountability which leads to squandery and corruption as we have now. The “flat tax” would mean everyone from the lowest paid to the highest including corporations pays a flat tax on their income. No writeoffs, no exemptions etc., but everyone paying equally in relation to their ability to ‘earn’ and to pay a fair share of the rent to maintain their way of life. A national sales tax would be another idea, or in a addition to.

          Carl Nemo **==

          • Almandine

            February 10, 2011 at 12:29 am

            Go to Fair tax.org and check it out.

    • griff

      February 10, 2011 at 12:43 am

      Hear hear!

    • logtroll

      February 12, 2011 at 9:23 am

      “but the actual problem with businesses keeping their capital under lock and key is the overall “economic climate” that forebodes nothing but an ill-framed future.”
      “They’re scared shitless of Obamacare, cap and trade, oil drilling moratoriums…”

      Let’s get real, Al. You were right in your first sentence, “The jobless numbers are so high because people are out of work”, which, of course says nothing. But your following list of stuff is not why companies aren’t hiring. They are not hiring because sales are down and American labor is expensive in the global marketplace. And they quit hiring long before Obama became president.

      I have had my own business making things for the construction industry for 34 years. It’s always been hard competing in price with foreign-made goods. My company has always worked the custom fringe because that’s where I could sell at “American” prices.

      My sales are way off. But if a customer shows up I won’t refuse to crank it up to supply the product, including hiring, because I’m scared shitless of Obamacare, yadda, yadda. In the absence of sales I won’t invest in hiring and and making stuff that I would just have to store, hoping a buyer will materialize.

      The problem isn’t in a shortage of stuff to buy, it’s a shortage of money to buy it with. That seems to have been a result of the collapse of the crazy gambling binge that Wall Street and the mortgage banking doofusses went on. I think we should find all the money that they stole, take it from them, and put it into a real economy that isn’t based on scams and speculation (or wars across the globe). But hey, that’s just me, I’ve never been all that practical.

      Your list of “issues”, which are impossible to discuss reasonably because they are all ideological battleflags, affect things, sure. But they are not the cause of businesses not hiring.

      Try and get a grip. Obama has had very little effect on anything, to date. If you want to get the kind of results that you have indicated a President can create, we’re going to have to switch to a monarchy or a dictatorship form of government. Then we could talk about overthowing the bad leader who is responsible for all that ails us.

      • Almandine

        February 12, 2011 at 2:22 pm

        $2T worth of priming the business pump indicates that “shortage of money” isn’t the problem. Business, with another $2T of capital waiting to be applied, further indicates that “lack of money” isn’t the problem. The issues may only be ideological battleflags to you, but they sure look like practical roadblocks to me.

        As for lack of sales, who amongst the credit-unworthy unemployed can buy anything. They need the jobs that aren’t available, and – importantly – they aren’t the only ones who buy things in this great global economy.

        Nope, between the govt and the bankers, a real mess has been made of the economy already, and only by not further walking down the socialist road filled with those battleflag potholes that will further derail us can we recover. We don’t need a benevolent dictator, we just need the govt to quit digging the holes deeper.

  2. Almandine

    February 10, 2011 at 6:51 pm

    • griff

      February 10, 2011 at 8:59 pm

      Surprise! Surprise! Every piece of legislation that gets passed costs more jobs.

      Both parties may as well unite under a single banner again, the Socio-Fascist Rapist Party. SFRP for short.

  3. Carl Nemo

    February 10, 2011 at 7:59 pm

    “How do you like me now ???” …extract from post

    What the hell does that mean…Almandine?

    Where did you get the idea that anyone on this site didn’t like you. You’re my favorite friend in thought good buddy. : )

    Thanks for the link concerning jobs vs. O-care. There was a discussion about this issue within the past week with deniers saying it would not be so. / : |

    I still can’t find specifics as to how this would happen, but it seems plausible when it comes to corporate efficiency and their bottomline; quality health care be damned…!

    Carl Nemo **==

    • Almandine

      February 10, 2011 at 11:15 pm

      It referred to the big O Carl… there he was… saving the poor folk from demise… bringing them health care they could afford… no matter their self-imposed obesity and pre-existing sloth… trouble was… they lost their jobs because the bosses had to choose between them and the bottom line.

      Hack2e… as our bud Bryan would say.

      Guess he ain’t such hot sh*t now, huh?

    • Almandine

      February 10, 2011 at 11:27 pm

      BTW… have you noticed that whether it’s jobs, illegal immigration, health insurance reform, oil exploration, coal-fired power plants, energy security in general, food inflation, personal liberty harrassment, border security, respect for stalwart foreign allies… need I add another category… the US is taking it on the chin from this guy?

      We certainly have change we MUST believe, because NOTHING is going right in this country anymore. What will it take before we throw the bum out?

      • Carl Nemo

        February 11, 2011 at 12:33 am

        I firmly believe the rabbit hole for conspiracy to control a nation goes far deeper than anyone can imagine.

        The office of the Presidency has been compromised by our intel agencies. Who sits in the White House is part of a carefully orchestrated script that’s controlled by the shadowy, movers and shakers that own this country lock, stock and barrel.

        They own the media outlets while our intel agencies are used for the sole purpose of control via manipulation and cooked intel. They influence the Presidency on a daily basis via their input through the NSC (National Security Council). In the past it was generally meddling in the affairs of other nations, but someone along the way came up with the bright idea of doing the same in this country. If you read the content of my recently supplied “Third World Traveler” link which outlines plot after plot, leading to coups and government destablization on an international scale, so why not here too? They are surely engineering this nation into becoming the very same “banana republics” in which they’ve become expert at controlling for many years.

        These agencies have access to every nuance of our duty Congressional crimpols lives, so there’s no difficulty in using old fashioned extortion or even veiled death threats on these characters and they know best to keep their mouths shut and to do what’s necessary to facilitate the ‘plan’. Not every pol is pressured, but key reps that sit on committees that control intel financing, Homeland Security, Justice etc. The script is complex, but it can be executed. The shadowy characters behind the scene have the time and it’s taken a little shy of 100 years to trowel in the bricks of our future electronically surveilled prison once known as the USA.

        This schema had its initial rooting with the authorization of the central bank; ie, the Federal Reserve along with the income tax for a source of revenue to operate at the people’s expense in 1913. As generations and wars have passed especially post WWII the power of these agencies grew exponentially until finally with the election of 2000, the Supreme Court was used as a ‘tool’ to determine the outcome of an election in order to ensconce the son of H.W. Bush, ‘Mr. CIA’ into office. The Bush family has a long history of war profiteering and in recent times even links to Diebold & Co.; I.E., voting machine fraud via backdoor access to the same. Only the gods know as to what depths the Bush family have plumbed to achieve their niche in this grand scheme of ultimate power and control of not only our nation, but he world at large, eventually to facilitate their dream of a “New World Order”. It’s here, it’s now and it’s real…!

        The Clinton’s had been rewarded with the prior eight years post H.W. Bush’s single term as a holding presidency for their cooperation with the Bush orchestrated Iran/Contra scandal by allowing the CIA to operate an airbase out of Mena, Arkansas in the late eighties until another “turn” could be had for a Bush family member. Barack Obama represents another of these ‘holding’ presidencies and even he and his family have links to the CIA.

        Mark my words Jeb Bush is going to run in 2012 and it will arranged via the MSM that he’ll be a ‘slamdunk’ for office with Obama being portrayed as a failure and the duty ‘fallguy’ no different than Jimmy Carter so the ‘rethugs’ can regain control; ie. , the flagship party of the wealthy class. Obama will not be reelected, but the alternative will be another four to eight years of the rapacious disassembly of this once great nation, all for a buck, euro or shekel more with the bonus of evermore draconian power over not only our citizens, but the world at large.

        Needless to say, things are not well in Gotham City…! / : |

        Carl Nemo **==

        • Almandine

          February 11, 2011 at 11:35 am

          And… drum roll… the solution is?

          • Carl Nemo

            February 11, 2011 at 1:04 pm

            There is no solution Al shy of mass protests, boycotts, strikes and general in their face civil unrest. They surely aren’t going to relent after so many years of working their plan for global enslavement with banking as their method of control.

            Possibly in all of the U.S. there’s probably no more than one million citizens that have a grasp of the issues and the monolith we face, the rest being quite content as long as they have jobs, a place to sleep, food, sex along with circuses.

            Solutions will emerge like new shoots after a forest fire once we experience the systemic destructiojn of our currency and social programs. People seem to focus better when truly desperate. Things simply aren’t bad enough yet.

            Politics, the ballot box, rooting for one’s main man/woman to make change won’t cut it. It’s like watching paint dry and things are unfolding too quickly while our elected crimpols talk, talk and talk some more without resolving anything positively for our benefit.

            *****

            “We certainly have change we MUST believe, because NOTHING is going right in this country anymore. What will it take before we throw the bum out?” …Almandine

            *****

            You asked and I gave you my opinion concerning “change we can believe in”…NOT! : |

            Carl Nemo **==

            • Almandine

              February 11, 2011 at 2:50 pm

              focus better when desperate… Amen.

              Look here at the latest neithercorp offering :

              http://neithercorp.us/npress/

  4. eve

    February 10, 2011 at 10:52 pm

    Over 42,000 factories closing in the US since 2000 is one good reason as to why.
    The other IS “free trade” and other global elite plans to get rich at the expense of the Middle Class.
    Wall St. cares absolutely nothing for Main St.

    Granted, this Obama care sound like a strong arm tactic instigated and dreamed up by insurance companies (who have already been the major cause of ultra-high medical prices). Well, that and pure greed.

  5. b mcclellan

    February 10, 2011 at 11:19 pm

    Midas looms, the masses lament.
    Pop said , when the shovel handle gets too short,
    you’re probably diggin a hole you’ll never get out of.. Llamraf

  6. woody188

    February 11, 2011 at 1:35 am

    It is is correct to differentiate between free trade and “global labor arbitrage.” US employers are substituting cheaper foreign labor for US labor in the goods and services that they supply to markets at home and abroad.

    As a result, the US labor force is being redirected to lower wage, nontradable services. Bureau of Labor Statistics payroll data show that job growth during the current recovery is concentrated in lower wage domestic services that cannot be outsourced.

    A country whose work force is concentrated in nontradable domestic services is a Third World country. Some refer to this situation as the “downward spiral” or the “race to the bottom” as it won’t end until wages are on par with cheaper imported goods.

    Combine this with our porous border policy and VISA policy and where does that leave American’s looking to work for a livable wage?

    American companies are creating lots of jobs, just not in the United States. Almost immediately after getting bailed out by the Obama Administration, GM announced a new engine plant in India. GM’s new SMARTECH engine was developed in GM Technical Centre-India in Bangalore in cooperation with the Talegaon engine plant. All this occurred after the bail out, and after they laid off and lowered the UAW’s wages and benefits en masse with government approval.

    Aren’t you glad we bailed them out so they could invest our kids tax money in India’s workforce? And GM is not alone in ignoring US citizens that had their wealth redistributed to the “too big to fails.” One would be hard pressed to name a single “US corporation” that isn’t expanding overseas workforces while the people of their home country are told to retrain in the jobs that are next to be shipped away.

    • Carl Nemo

      February 11, 2011 at 1:55 am

      Solid commentary as usual Woody.

      Seemingly to me its a fait accompli that our nation is doomed. We see no response from the general population. In France, Greece, Egypt we see people so beat down that they take to the streets and burn “sh*t” down.

      Everyday in everyway the American people are being mugged by our government, but seemingly they simply don’t care. Is entertainment supported by a host of ‘electronic’ gadgets is what distracts them from any form of activism? Is life in this country still quite good for most?

      I admire you for having a plan and executing the same for the protection of your family.

      It’s my hope that none of my thoughts and prognostications concerning the grim outcome for this nation comes true, but so many things are crumbling before our eyes and we never get to enjoy on any given day some “hope” that things will turn around. The crimpols in D.C. are destroying us and they’ve got their smug chins jutted out, looking into the camera basically saying “tough” through their actions and votes.

      We’re overdue for a revolution through “peaceful” boycotts, strikes and mass picketing in D.C. and these Congressional reps offices. They are the facilitating “rubber stamps” for this agenda. The only way shy of an outright, down home, old-fashioned bloody revolution is to seize control of these reps…period! It should become a national tradition that politicians never get reelected, unless they show an overwhelming bias towards doing the will of their constituents. Reelection would become rare indeed, unless they smartened up faster than I could surmise.

      Carl Nemo **==

  7. b mcclellan

    February 11, 2011 at 2:39 am

    Pop said,
    Strange bedfellows make the best politicians ?

    I’m not quite sure what that means.

    I know this is no audition for absolution,
    War has become so delicate upon us.
    Beware mental callousness.
    Cut that budget too.
    If everybody pays becomes the norm, will someone tell me who gets to read the ruler ?