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Working In These Times

Saturday, Jul 3, 2010, 4:40 pm

A Dangerous Combo: Weak Job Markets and Republican Stupidity

BY David Moberg

The job numbers for June, coming on the heels of the latest failure of Congress to renew its extensions of unemployment insurance, offer once again persuasive evidence that the vast majority of Republican members of Congress–abetted by a small but treacherous sliver of Democrats–are either

  • stupid (they don’t understand how unemployment compensation stimulates or sustains employment by maintaining consumer demand);
  • cruel (they don’t care about the suffering of the unemployed, whom they see as shiftless parasites who prefer the dole to a job, even though there are five unemployed people for every job and the San Francisco Federal Reserve showed extended benefits were not prolonging unemployment);
  • cowardly (they are unwilling to stand up to the far right of the party, including the Tea Partiers), or
  • cynical (they figure the worse the economy, the better they will do in the mid-term elections, giving them a chance to push through deep cuts to existing social welfare programs, like social security, and defend or increase tax cuts for the rich, making the future economy worse for longer).

Personally, I think most win on at least three points.

Even though the June unemployment rate dropped to 9.5 percent, overall employment declined (as temporary census jobs ended) and private sector job growth was below average for the first half of the year.  The anomaly is explained by the growth–by about 415,000–in marginally attached workers, who wanted work but do not have jobs, and recently gave up looking in vain for work.

As a selection of charts prepared by the Center on Budget and Policy Priorities clearly shows, unemployment remains unusually high for this many months after the recession apparently ended, the share of the population with a job is depressed (and declining), long-term unemployment remains at record levels (double the previous post World War II peak as a share of all unemployed), and job losses surpass other post-war recessions.

Indeed, economist David Rosnick at the Center for Economic and Policy Research shows that if one adjusts for the change in the age structure of the workforce, unemployment rates have been the worst since the Great Depression, even higher than in the early 1980s.  The share of the workforce under 25 is now only about half what it was in 1980.  But a much higher percentage of young workers are unemployed on average compared to older workers, who have experience, attachments, careers. So even if overall unemployment rates were the same in 1983 and today, that rate would indicate “a weaker labor market” in 2010.  Rosnick figures that, adjusting for age, “for nearly every age group the unemployment rate is higher today than it was during the worst of the early 1980s recession.”

Congress is setting its own records by refusing to renew extended unemployment compensation.  According to a report by Heather Boushey and others for the Center for American Progress and the National Employment Law Project,


    Never before has Congress cut off benefits when unemployment was so high. Since the 1950s, federal unemployment insurance extensions remained in place during recessionary period until unemployment dropped to as low as 5.0 percent. The highest unemployment rate at which these extensions were allowed to expire was 7.2 percent....

By July 2, 1.72 million jobless workers, most out of work for six months or longer, lost their benefits, according to the Department of Labor, and by the end of the month 3.23 million if Republicans continue to block action on unemployment assistance. 

But everyone, including those with a job now, will ultimately lose.  Each dollar spent on unemployment compensation adds $1.60 to the economy, according to Moody’s economist Mark Zandi, one of most effective direct way to stimulate job growth.

And one reason the job picture was weak in June was states were shedding workers–and will increase their layoffs hundreds of thousands over coming months without federal support for state budgets.

Administration officials, while noting the remaining severe problems, talked up the positive trends and job creation through their stimulus program, including an array of construction projects now kicking in as well as new broadband expansion, both of which will help the economy in the long run as well.

The stimulus has–and still is–working, just not as robustly as needed. Many economists, like CEPR co-director Dean Baker note the weakness in today’s reports–like shorter hours, a decline in earnings, a drop in labor force participation, and slowdowns in growth or deeper losses in key industries–and conclude “there is little basis for a hope of an improvement based on the establishment data....And there are no obvious candidates for improved growth any time soon...With state and local governments cutting back to deal with deficits, house prices falling again, and wages not keeping pace with inflation, there is little hope for a robust growth any time soon. It is likely that the unemployment rate will rise in the second half of the year.”

That’s why Economic Policy Institute research and policy director John Irons told the deficit commission this week, as Paul Krugman did today in the New York Times, that Congress should not reduce deficits significantly until unemployment has dropped significantly and continuing downwards. “To be concrete,” he said, “unemployment should reach 6 percent or lower...”

Cutting deficits greatly before then, he might have added, would be stupid, cruel, cowardly or cynical.

David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy. He can be reached at davidmoberg@inthesetimes.com.

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