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Real levels of unemployment in a moribund economy?

Interesting arguments by Daniel Amerman (whom I never heard of previously):

The US government has fantastically increased its spending relative to the overall economy, but the government's sources of revenues haven't increased. The target of this spending has been the "Third Box" - the covering over of real, persistent and massive private sector job losses through creating what are effectively artificial short-term jobs, originally paid for by ramping up the deficit at a fantastic rate, with the covering over now being funded by the creation of new money from thin air.

What happens if we add the real, full U6 unemployment rate of 17% to the hole in the private economy that is currently being covered by the government's spending money it doesn't have? The simplest approach is to say that 9% of the US economy is manufactured money that's funding government deficits, and if we didn't create artificial money to fund artificial jobs, then that 9% of the economy implodes. If 9% of the economy abruptly disappears, there goes 9% of the jobs as well, so the unemployment rate would immediately jump by another 9%. There are a staggering number of simplifications involved in this approach, but it's not a bad approximation for illustration and discussion purposes within a short article.
 

DominiConnor

Quant Headhunter
Part of my model of the "new normal" is that there are going to be vastly fewer 'permanent' jobs.
That's independent of the level of employment, but is an effect of globalisation and technology.
In the 'olden days' which ended around 1990, many people could realistically expect to work for 10 years or more at the same place. Partly this was caused by firms and governments so large and stable it was hard to see them losing staff any time soon. Government employees consciously made a trade off that offered very low risk of losing their job against relatively low pay.

Even before the recession, the Thatcherite revolution of selling state enterprises and outsourcing meant that one side of that trade was beginning to fail.

Athough it's obvious that technology is constantly changing, that's only the derivative, the area under the curve follows this and the variety of different products & services is also going up.

Again in the 'olden days' there simply weren't that many different jobs, thus as (for instance) car technology changed, the vast bulk of workers could adapt. Now there is more value-add in the electronics than the steel, and workers are more specialised, which means that gaps you need to cross are bigger.

Also the rate of area-change means that a region or country finds it harder to maintain a lead, since the time take to become as competent as a company, region or country in any economic activity is vastly less.

In another thread, we discuss how what I shall call launch education affects the success of countries. I believe this is far from the full question.

Very few people have a realistic chance of running their careers based upon the education they get before starting work, or more accurately, few people can have good careers that way.

I'm not aware of any country that has good education for workers after age 25.
In the UK (for instance) the entire national adult education budget is less than individual budgets for some individual universities.

That's going to hurt everyone, everywhere.
 
Part of my model of the "new normal" is that there are going to be vastly fewer 'permanent' jobs.
That's independent of the level of employment, but is an effect of globalisation and technology.

The days of full employment are over for good. Partly due to offshoring and automation. And partly (in the US) because of ongoing imperial decline, which means, inter alia, that it's losing markets and spheres of influence to rivals, and spending more on military adventures than on the rearguard actions of shoring up its production and educational base.

In the US most people who don't have a job for any length of time are essentially pauperised. What's amazing is -- in contrast to Europe -- how little mass action there has been to a deepening crisis.
 
Apologies to all and sundry but the "new normal" (referred to by Dominic) interests me greatly; it's clear that the social fabric of the USA is changing radically and probably irrevocably. An interesting essay which I found today:

So, what does it take to be middle class today? That depends, and it's not necessarily an income number, though many analysts throw around income from $70,000 to $100,000....You'll need to be able to sustain those dollars year after year without much in the way of cash flow interruption.

To be middle class, you will also need the one thing the current economic and socio-political situation refuses to oblige: stability.

You need to know that at least most of the important things that you've build your life on will not disappear tomorrow. For example, the job that expensive education bought will not be down-sized, right-sized, off-shored, out-sourced or become obsolete and eliminated altogether.

Unfortunately, that modicum of stability no longer exists. Too many things that put your stability at risk are out of your control.

It may not seem possible, but in today's global corporate market, your job could be history tomorrow.

The probability that you will need to retrain for another job, no matter how old you are, is high and today education is very expensive and may mean becoming a debtor in a big way.

That large corporations will enter more and more business categories where small business once thrived is a foregone conclusion. Today, there are only a handful of small business opportunities that have not been taken over by corporate category killer big box and national chain operations.
 
Instead of waiting for unemployment check or whining about the sad state of the economy, people can create their own job. Build a business, freelance, consult, etc.


..most unemployed people are low-qualified workers. how do you expect, for example, construction workers to start their own businesses?

...you can do that if you are an investment banker (who i can't care less about..) or some kind of highly-qualified employee. in that case, sure you can get along with no unemployment checks for quite a while
but if you live from paycheck to paycheck like most people do, then I bet you'll be waiting for that unemployment check and whining about the economy...
 
..most unemployed people are low-qualified workers. how do you expect, for example, construction workers to start their own businesses?

...you can do that if you are an investment banker (who i can't care less about..) or some kind of highly-qualified employee. in that case, sure you can get along with no unemployment checks for quite a while
but if you live from paycheck to paycheck like most people do, then I bet you'll be waiting for that unemployment check and whining about the economy...

Many highly-qualified workers who are laid off free-lance, become "consultants"; the problem is they may not get much (or any) work -- certainly not enough to replace their previous paycheck. Also, the failure rate for small business has always been high -- in this economic climate, and with chains and black boxes having cannibalised so much of the economy, it's even higher. Sixty years ago setting up a small business was probably easier; these days, when the opening of a single Wal-Mart bankrupts over 400 local small retailers and their local and regional suppliers, it's more difficult. But the American mind-set is attuned to individual solutions to collective problems -- which is one reason why, unlike the Europeans, the Americans have not been taking to the streets.
 
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