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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

January 8, 2010 at 10:12 AM

The unemployment picture: Why we’re not out of the danger zone yet

Top of the News: Americans are cockeyed optimists. Barbara Ehrenreich writes about this in her new book Bright-sided: How the Relentless Promotion of Positive Thinking Has Undermined America. The tendency has grown as more of the American economy has become dependent on selling speculative investments, from stocks to houses.

So today the media meme is that the latest unemployment report, while still not perfect, shows the job market and the economy are on the mend. Color me skeptical.

The nation lost 85,000 jobs in December — usually a hot spot of seasonal hiring — a result higher than expected. A revision to the November jobs report show a slight gain: 4,000. But remember, the economy must create 125,000 net new jobs every month just to stay even with the growth in the labor force.

More sobering data can be found deeper in the weeds of today’s report: the number of discouraged workers grew by 661,000 — people who have given up looking because jobs in their fields simply don’t exist (like, er, newspapering). This drives the real unemployment, which also includes temps who want to work full-time, rate to at least 17.3 percent.

Heidi Schierholtz, economist at the Economic Policy Institute, says the recession has created 3.6 million of these “missing workers.” Her assessment: “When the recovery begins to take hold and these missing workers start entering or reentering the workforce in search of jobs, it will put strong upward pressure on the unemployment rate.”

I have yet to find a serious economist who expects us to make up the job losses of the recent lost decade for years — between 2014 and 2017. And that outcome would be far different from the Great American Jobs Machine known through most of the last half of the 20th century. Our old nemeses of high debt, deindustrialization and trade imbalances are partly to blame. Companies are learning to work with fewer staff and continuing to offshore jobs. And, to beat a dead horse out of necessity, restarting bubbles in housing, etc., won’t work.

Things get dicey with the year’s outlook. If the economy does maintain slow, steady growth, some employment small gains might come. But what if the carry trade suddenly collapses? What if inflation rises, the Fed might be forced to raise interest rates, risking a double-top recession? Some rates are already rising, hurting housing further.

Take this for what it’s worth. I want us to add millions of jobs this year. But wanting and having are not the same.

Today’s Econ Haiku:

Fixing smog costs bucks

Breathing it costs even more

Penny wise…cough, cough

Comments | More in Jobs/Unemployment

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