Columns / Discourse / February 9, 2011

Voice of Reason: Unemployment

Contrary to popular belief; things happened in places that weren’t Egypt last week, most notably here in the United States with the publication of a new employment report. Powered by a rebound in manufacturing and health care, the United States managed to create a lackluster 36,000 jobs in the last month, some 164,000 less than are needed just to keep pace with population growth. This bleak job report is just one more sign of a very bleak truth: high unemployment is here to stay.

To begin, take a look at those numbers. Daily Finance puts the number of jobs we would need to erase the effects of the recession at 9.4 million to get back to 5.75 percent unemployment, still high by previous standards (I remember being taught in high school economics that about 4 percent was ideal). Even if the United States matched the growth rates achieved in the 90s, it would take until 2016 to reach that 5.75 percent level. Given a more realistic rate of 200,000 new jobs a month, still far above what we’re actually producing at the moment, it would take until 2020. Both of these numbers assume, of course, that we don’t slip back into a recession any time in the next 10 years, which is assuming quite a lot.

Keeping some perspective on our problems is helpful too. Americans got used to an unemployment rate of 4 to 5 percent before the recession, but it’s worth remembering that this rate is highly unusual if you look around the world. The advanced European economies clock in at 7.9 percent for the United Kingdom, 9.5 percent for France and 7.1 percent for economic powerhouse Germany. Spain is managing an astounding 18 percent. None of these countries had rates all that different before the recession hit. Most of the countries that have low rates of unemployment also have incredibly inefficient state sectors (Cuba’s 2 percent) or vast amounts of oil wealth to throw at the problem (2.2 percent in Kuwait). Neither of those options is available to America.

Where does the problem lie? The economy is growing again, so where are the jobs? Is the problem that the Obama administration’s big government programs are strangling businesses? That seems pretty unlikely. One would expect that if health care reform has crushed growth anywhere it would be in health care, but this has been one of the only sectors to post consistent growth throughout the recession. The only other major regulation to pass, financial reform, targets large Wall Street banks, which are posting very healthy profits. Maybe the immigrants are taking the jobs? No, illegal immigration was negative during the recession as the economy hemorrhaged jobs. The problem has to be elsewhere.

The terrible truth comes when you look at the other economic indicators beyond the unemployment rate. GDP growth is back to normal, inflation is well under control, exports are booming and corporate profits are soaring. If I’m a business owner who laid off people two years ago and am now making very healthy profits, I have no reason to hire them back. All the indicators show that they weren’t adding much profitability to begin with. On a related note, workers with college degrees have an unemployment rate of about 5 percent, whereas those without high school degrees have a rate of 16 percent, which strongly implies it is mostly the less-productive workers who are getting hammered.

All is not lost. Unemployment hit 33 percent during the Depression and 11 percent as recently as the 1980s, and we have always bounced back. Given enough time and some major reforms (the school system comes to mind), we can get back to a level that can minimize the pain of long-term unemployment. We just shouldn’t imagine the road is going to be as quick and easy as we’ve been promised.

(Figures come from The Daily Finance, Foreign Policy and the CIA World Factbook)

Matt Barry
Matt Barry is a senior majoring in international relations and double minoring in economics and German. This is his third year working for TKS, having served previously as discourse editor. He has worked for such organizations as the Chicago Council on Global Affairs, Premier Tourism Marketing and the Council on American Islamic Relations-Chicago, where his work appeared in such publications as Leisure Group Travel, Ski & Ride Club Guide and The Chicago Monitor. Matt has written his political opinion column, "The Voice of Reason," weekly for three years, which finished in first place at the 2012 Illinois College Press Association conference and was also recognized at the 2013 conference.


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