The 'Real Unemployment' Needs Real Solutions

"Everyone agrees that the recession is over," said Larry Summers. Yet December's unemployment numbers announced last Friday suggest otherwise -- especially the 'real unemployment' figure.
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"Everyone agrees that the recession is over," said Larry Summers, President Obama's top economic advisor, on December 13.

Yet December's unemployment numbers announced last Friday suggest otherwise -- especially the 'real unemployment' figure.

According to the Bureau of Labor Statistics the official unemployment rate is 10%, a figure which itself caused a major headline to blare, "U.S. Job Losses Dim Hopes for Quick Upswing."

But in fact real unemployment in the United States is stuck at a dismal 19%, a figure nearly twice the so-called official number. And the economy is short a staggering 22.4 million jobs in order to have an overall full unemployment rate of 5%, which is more than twice the 9 million figure the administration is using.

These sharp contrasts arise because the BLS uses only survey data rather than much more accurate payroll data. It also excludes changes in employment among the nation's 11.2 million farm and self-employed workers, even though together they represent more than 7% of the civilian labor force. Most important, however, it does not take into account the 15.1 million workers who are either part-time-of-necessity because they can't find full-time work, marginally attached because they live on the very fringes of employment, or out of the labor force because they are discouraged and have given up looking.

With these three adjustments made, the number of real workers in all four categories of unemployment -- BLS, part-time-of-necessity, marginally attached, and discouraged -- totals 30.4 million instead of BLS's single category figure of 15.3 million. And the number of real unemployed workers has increased by 13.6 million since the start of the recession instead of by BLS's figure of 8.4 million -- in contrast, we should have been creating a net 2.6 million new jobs just to keep up with the natural growth in the labor force of around 108,000 workers per month.

Even the average full-time worker in the U.S. is now working the economic equivalent of only 33 hours per week, a record low number. And in further stark signs of the ongoing depths of this recession, unemployed workers are out of work an average of at least 29 weeks, and the real number of workers unemployed a half year or more is around 10 million.

The economic recovery that Mr. Summers was trumpeting after the meager 2.2% September GDP growth numbers came out is in fact a "jobless recovery" -- one which already involves the largest absolute number of unemployed American workers ever, and one which may see another half million jobs lost before we really bottom out. And sadly, it will take years to recover both the 13 million jobs that have been lost in just the last two years plus the 9 million additional jobs we need to find in order to get back to real full employment.

Using GDP growth alone is a very weak and misleading indicator of true economic vitality. The only measures that really matter are, initially, the "months before net job growth reemerges" and, ultimately, total employment itself. Once the health care reform bill is passed and signed by the president later this month, it is imperative that the Executive and the Congress focus their full attention on unemployment and on charting a clear path to finding those millions of missing jobs. In short order, they need to:
  • Throw their full weight behind an all-of-government, fully-empowered manufacturing and jobs policy that: puts U.S. workers, miners and farmers first; is as neomercantilist as the policies of our major trading partners; and results in a medium-term doubling of the 20 million American non-service workers and their contribution to our GDP. Right now, China has almost twice as many manufacturing employees -- 100 million -- as the United States, Australia, Canada, France, Germany, Japan, Italy, Netherlands, Sweden, Taiwan and the UK have combined (55.4 million).

  • Adopt "Buy American" requirements related to federal government procurement, which currently makes up about 20% of the American economy. The U.S. is almost alone among the developed nations and China in not having a significant buy-domestic government procurement program, yet no single stimulus effort would do more to resuscitate U.S. employment, especially manufacturing employment, and materially reduce our nation's massive trade deficit.
  • Bring what's called a Section 301 case at USTR against China's "Indigenous Innovation Production Accreditation Program" that was promulgated on November 15, 2009. China's new Program, which limits all Chinese central and provincial government procurement to companies that have indigenous -- read: "Chinese" -- innovation, is far more restrictive than any other buy-domestic program in the world, and it significantly compounds China's already unfair discrimination against foreign commerce in general and with U.S. manufacturers in particular. (Because China is still not a member of the WTO Government Procurement Code, a Section 301 action is unfortunately the only remedy currently available.)
  • Mitigate, by whatever means available, China's currency manipulation -- which creates a staggering 25% illegal subsidy on Chinese exports -- and its other unfair trade practices and illegal subsidies.
  • Fund a 10-year program of significant public investment to upgrade and rebuild our nation's major infrastructure, which would immediately create 18,000 new jobs for each1 billion we spend. This program should include a new National Infrastructure Bank, incentives for private funding of public infrastructure, a multi-year green transportation program funded through an increase in gasoline taxes, and targeted federal government spending in improving energy efficiency.
  • Enact major new tax incentives to encourage businesses to invest in wind and solar energy technologies, state-of-the-art laboratories, and follow-on manufacturing plants and equipment. This effort should include 10% investment tax credits for renovating and modernizing manufacturing facilities, and particular attention needs to be paid to encouraging R&D in America that leads to jobs in America rather than overseas.
  • Reduce corporate income and payroll taxes and in return enact a value-added-tax, or VAT, of the sort which 152 countries in the world already have. This VAT is needed in order to quickly restore the essential tax-policy link between productivity growth and wage gains, and it would materially reduce our nation's crushing on-going trade deficit, while largely stop the offshoring of high-quality American jobs.
  • Christine Lagarde, France's Minister for the Economy, recently answered the critical question of when we should declare the Great Recession of 2007 over by saying that while everyone has their own yardstick, hers is very simple: "Only when we have cut unemployment, can we say the crisis is finished."

    The 30 million Americans who are now effectively unemployed on Main Street and their neighbors know Ms. Lagarde is right, just as they know that the meager 2.2% growth in third quarter GDP -- which mostly came from resuscitating (and not even reforming) Wall Street -- doesn't mean that this recession is at all "over," as some in the administration would misleadingly have us believe.

    Leo Hindery, Jr. chairs the US Economy/Smart Globalization Initiative at the New America Foundation. He is the former chief executive of AT&T Broadband and other major media and telecom companies.

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