On Jobs, Unfulfilled Expectations Abound

"What we did, in essence, was trade tax cuts for the wealthy and spending on wars for increased working class misery – higher unemployment, insufficient social service support and a slower recovery from the recession." — Professor Mark Thoma for The Fiscal Times.

"But, on the other hand, a sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery. The solution to this dilemma, I believe, lies in recognizing that our nation's fiscal problems are inherently long term in nature. Consequently, the appropriate response is to move quickly to enact a credible, long-term plan for fiscal consolidation." — Federal Reserve Chairman Ben Bernanke speaking in Atlanta

Today's graduating students, be they college bound or university graduates, are facing one of the grimmest employment environments in generations. Moreover, due to our unfinished economic crisis the youth of today face a bewildering and stagnating economy with few areas of genuine growth or prospects for higher incomes. This is true for all job seekers, even the parents of these students, whom 85 percent of said graduates expect to be living with after graduation.

The latest job numbers are reason enough to be fairly pessimistic heading into the summer months, as noted by the Center for American Progress: "May is the 23rd month of unemployment at or above 9 percent since the Great Recession began (2007). This is more months of high unemployment of such magnitude than during any other recession going back to the Great Depression."

But despite these hard facts and the reality that dismal indicators of economic inequality are at record levels not seen since the last Depression, most economists still recommend higher education, if at all possible, to gain some needed advantage in the workforce. College grads typically enjoy lower unemployment rates than many mere high school grads with little or no additional training. 

Almost any significant high quality training beyond high school will garner workers more wages per hour and year over time, typically making them more productive, and granting them better economic mobility and job flexibility. However, many people have now begun to question this proposition, especially given the added burden of debt (an average of over $24,000 per undergraduate) needed to obtain such an expensive luxury good in today's poor economy.

More frightening stats on student debt are available here and here.

Thus, the comprehensive employment picture is that there remain fewer "good jobs" to go around, with perhaps 50 percent or more of today's college grads filling jobs that don't strictly require a college degree, including fry cooks, waiters and retail sales people.

The Bureau of Labor Statistics might suggest which career and job sectors are those to look forward to for the relatively few real growth sectors seen and here graphically. You might try to investigate this by straight income and/or by region. You can also view that through time historically from 1850 to 2000 here too. Overall though the diagnosis is one of a vanishing middle class.

Dean Baker, the prescient economist and co-director of the Center for Economic and Policy Research, which called the great real estate asset bubble early, now says that the disaster of a possible "second depression" may not be successfully averted if the dismal jobs numbers and the related depression of demand in our economy does not improve soon.  

Baker noted, "The second factor depressing consumption has been the continuing deflation of the housing bubble. To date, the decline in house prices has destroyed nearly $7 trillion in housing equity. And prices are still falling. Homeowners are likely to see another $1 trillion in equity disappear over the next year. The loss of this wealth will lead homeowners to cut back their consumption further in order to rebuild their savings."

Similarly, Andrew Sum and other economists from Northeastern University have termed this a "jobless and wageless recovery" from the Great Recession of 2007-2009.

As reported by Jeff Madrick, "For the first time in more than 60 years, aggregate wages and salaries adjusted for inflation did not rise after seven quarters of recovery. What did rise was corporate profits -- and sharply. Here's the stunner, as Sum calculates: Pre-tax corporate profits in 2010 dollars rose by $464 billion and real wage and salaries in 2010 dollars fell by $22 billion."

Madrick added, "This disconnect between GDP growth and jobs is the economic issue of our time." And he suggests some programatic directions that might help to address the issue: "We need more stimulus, an outright jobs-creating program, tax incentives to keep jobs here, serious infrastructure and manufacturing investment by the government, and perhaps a reconsideration of free-trade policies."

Financial Times also agrees with the need for more new stimulative measures, with Martin Wolf arguing, "It is far more likely, in current circumstances, that support will be withdrawn too soon than too late, undermining the recovery and generating a prolonged stagnation, with malign long-structural effects."

Still some smart job creation ideas abound, with public infrastructure banks among these. Overall national needs are described here. More ideas are here from Jared Bernstein here.

But despite the clear and present emergency on jobs, our national economic policies are stuck on gridlock in Washington, with the GOP essentially gleefully filibustering any and all positions to be filled, with old moss backed and proudly obstructionist senators blocking even Nobel Prize winning economists from seats on the Federal Reserve Board.

This Sen. Richard Shelby did to Nobelist Peter Diamond for more than a year before Diamond finally gave up and went back to MIT to teach. Bush-era conservative economist Andrew Samwick had this to say about this nasty bit of partisan personal decapitation: "When historians look back at our era and write about how a nation so blessed was able to squander those blessings so dramatically, they won't have to look much further than the U.S. Senate. Words, polite ones anyway, cannot really express how absurd it is that the nomination of Peter Diamond for the Board of Governors of the Federal Reserve System has come down to this. Even without the Nobel Prize, his qualifications for the position were beyond question -- at least by anyone who could be persuaded by the answers. I continue to wonder whether our society is resilient enough to withstand many more years of this institutionalized immaturity on important policy matters." As we all might too.

On the administration's side, as former IMF chief economist Simon Johnson writes from MIT, "The banking emperor has no clothes describing our hopelessly confused and deeply compromised Treasury secretary, Tim Geithner. Added together, this suggests one of our most powerful policymakers is headed very much in the wrong direction." Indeed, "Wrong Way" Corrigan had a more clear sense of direction.

Also, as predicted here and elsewhere, the needlessly silly but still highly dangerous gaming of the debt ceiling by the GOP Congress has already caused considerable damage too, according to long-time budget maven Stan Collender. Stan tells us that Wall Street Is Already Reacting Negatively To Debt Ceiling Fight and that this reaction can clearly be seen in the current trading of credit default swaps on U.S. debt:

"As of late May, the number of CDS contracts — essentially insurance policies on  the possibility of a default — had risen by 82 percent. Equally as important, the cost of a CDS — the best indication of how much riskier U.S. debt has become — rose by more than 35 percent from April to May. Last week I spoke to a number of people who calculate such things for a living, and they said this change means that the interest rate the U.S. government has to pay has already increased by as much as 40 basis points compared with what it otherwise would be. This means higher federal borrowing costs and deficits, and overall higher interest rates on everything from car loans to mortgages to credit cards."

So yes, the GOP intransigence and general churlishness at refusing to come to any real compromise on raising the debt ceiling for the sake of posterity and the nation's possible healthy economic future is already costing you and me money!

Though the general picture of our benighted economy is still not for the faint of heart there are plenty of solid good ideas of how to extract ourselves from the mess we're in. Here's Andy Grove of Intel fame on How America can create Jobs. See also Jared Bernstein's useful thoughts on jobs and higher education and training in We're not all Rocket Scientists and here.

Nobelist Michael Spence has a more sober systemic assessment here for Yahoo Finance: "Major employment problems in the near future are a near certainty."

That's one of the conclusions of a March report co-authored by Spence. Spence's new book, The New Convergence: The Future of Economic Growth in a Multispeed World, says the U.S. is grappling with a multi-speed domestic labor market with dramatic new vistas of fierce competition from emerging markets.  

His recommended list of "reforms [that] would help: greater investment in human capital, education, research, and infrastructure; a sensible energy policy; a simplified pro-investment tax system. They're not easy things, and they're harder with a fiscal deficit," he said. "But if we did all of those things for five years and upped our game, it would have a material effect on the employment challenge."

Sounds oh so familiar some how? Hopefully, one day someone in Washington might avail themselves of these approaches before we all find ourselves circling the drain. In the meantime, we're all counting on the younger generation to study hard and become productive self-sustaining citizens eventually. Goodness knows few of us will now be able to retire in any case!