May 3rd brought news that the unemployment rate has dipped to 7.5 percent and there's been an alarming rise in the suicide rate for middle-aged Americans. According to the Center for Disease Control, "The [suicide] increase does coincide with a decrease in financial standing for a lot of families..." 4.35 million Americans have been unemployed for more than 26 weeks. Whose fault is this?
As a result of "the great recession," U.S. unemployment peaked at 10.2 percent in October of 2009. Since, the job situation has steadily improved. The economy is recovering, but not as fast as many had hoped.
4.35 million workers have been jobless for more than 26 weeks. Although the total is down from 6.7 million in April of 2010, this trend is little consolation to forlorn jobseekers who typically have been without employment for 36.5 weeks.
Many observers believe the situation is actually grimmer because of the millions of workers who are no longer included in the labor force statistic because they are "discouraged" or "marginally attached." One of these is George Ross, whose story was in the San Francisco Chronicle. Ross, an information technology specialist, has been out of work for two years, but quit looking because he has to care for his son, a disabled Afghanistan War veteran.
There are two competing economic explanations for long-term unemployment. Structural unemployment postulates long-term unemployment results from the changed nature of the labor market: it argues there are jobs available but the long-term jobless don't have the proper skills. However, a recent paper by economists Edward Lazear and James Spletzer disputed this: "An analysis of labor market data suggests that there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment." Furthermore, the number of unemployed persons per job opening is high: "When the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.8. When the recession ended (June 2009), there were 6.2 unemployed persons." Currently the metric is 3.1.
The second economic explanation is cyclical unemployment. Lazear and Spletzer said, "The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession." Writing in the New York Times Nelson Schwartz observed:
"the jobless rate remains far higher than it typically would be this far into a recovery... While the private sector has been on the upswing since last summer, cutbacks in government employment continue to prevent a stronger acceleration in the economy."
The cyclical explanation has three components. Writing in the Washington Post Zachary Goldfarb blamed weak economic conditions:
"Several years after the end of the recession, more than 10 million people still owe more on their homes than their properties are worth... [Studies] have shown that carrying a high debt leads consumers to spend less and save more, depriving the economy of its traditional engine of growth."
Furthermore, because of economic uncertainty Employers are taking longer to fill job openings. Writing in the New York Times Catherine Rampell noted, "vacancies are staying unfilled much longer than they used to -- an average of 23 business days today compared to a low of 15 in mid-2009."
And there's systemic bias against the long-term unemployed. Bloomberg News reported, "When researchers at the Federal Reserve Bank of Boston sent fake resumes to employers with job openings, the length of time candidates had been out of work mattered more than their job experience in determining who got called in for an interview." That's the experience described by software developer, Geoffrey Weglarz, on a recent PBS News Hour. Weglarz has been out of work for two years, has applied for 481 jobs, and has run out of money.
Who's to blame for America's long-term unemployment problem?
The primary fault lies with failed conservative economic policy. Beginning with the Reagan administration, Republicans were guided by three malignant notions: helping the rich get richer would inevitably help everyone else; markets were inherently self correcting and therefore there was no need for government regulation; and the U.S. did not need an economic strategy because the free market would fix our problems. This ideology led the Bush administration to ignore the housing bubble and Wall Street malfeasance and caused the great recession of 2008.
Unfortunately, Republicans can't admit their philosophy was wrong. They cling to Reaganomics and contend that government is the problem. Even worse, Republicans have no sympathy for the unemployed. Republican presidential candidate, Herman Cain, told the Wall Street Journal, "If you don't have a job and you're not rich, blame yourself."
President Obama has tried to do the right thing, both for the economy and the unemployed, but has had no support from Republicans. That situation is unlikely to change until Democrats control Congress.