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Why the Unemployment Rate Still Stinks

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August 23, 2013 – Comments (2)

How are you enjoying our economic recovery? Profit among the S&P 500 companies are at record levels. Our GDP growth is anemic at around 2%, certainly not the 3-5% we would normally expect, but it is the longest string of years of economic growth since the Depression. What gives? Do you not feel the love? That is cuz unemployment remains stubbornly high.

NUMBERS LIE

7.4% is the “official” unemployment rate, but, unbeknowingst to many, there are many ways to measure it. A more relevant measure includes those of us who are only part-time employed (which includes yours truly), or those of who have totally given up. This measure, known as the U6, is around 14%. As much as 1/3 of the “young” are unemployed. The total % of adults who “participate” in the workforce are at lows not seen since the Great Depression. So you see, things are actually much worse than the “headline” unemployment rate.

HIB VISA FIB

It is making the rounds that tech companies do not have enough qualified candidates to fill their vacancies, and therefore need more HIBs to import techies to hire. Not true. If we say “there are not enough qualified candidates willing to fill our vacancies at the wages we wish to pay”, then they are correct. Truth be told, there are legions of qualified, experienced tech employees whom employers could hire to fill vacancies. In my case, I am a qualified journeyman-level COBOL programmer whose career history commands a salary of not less than $100k. Good luck finding an employer willing to pay that: they would rather hire 3 contract programmers from India who command salaries of, at most, $35K, despite the fact I can (and have) coded programming rings around teams of these contract employees.

JOB OPENINGS ARE NOT

There was one article (OK, my search-fu is weak; I could not find it again) that questioned whether an advertised job vacancy was real. I second the doubt. Having several job openings for several months has its PR and political value. If they receive applications? Just chuck it into the circular file, and never even have job interviews. Also, one sign of a company in trouble is that they do not have open positions, are not accepting job applications, and do not schedule job interviews. Having several open positions for several months is surely a sign of the strength of a company, yes?

MEXICO

For decades, Mexico has used our country to solve their poverty problem. They simply helped her own citizens pile across our border without green cards to find their fortune. Besides being illegal, it kills young people, minorities, and those with no job experience: they no longer can have the same jobs I had at that point in my job history, and helped my career off to a good start. Given the painfully high numbers of legit people in our country who cannot find a job, it makes no sense to be kind to the interlopers. The greatest boon to the unemployed would be to get the latter to go home (not that this is practical).

KILL THE MINIMUM WAGE

As long as the minimum wage stays were it is at, or even increasing it, unemployment among the most vulnerable will never improve. See, only young people or those reentering the work force work for minimum wage. And the higher the minimum wage, the fewer of these applicants will ever find their first job. Those who exposit that a low minimum wage makes a worker unable to support themselves, let along a family, and is therefore immoral. Ahem: those will work at minimum wage, but only for a limited time. If you are employed at the same place for 6 months and are still earning only minimum wage, then there is something wrong with you personally (or see 'Mexico' above). Cutting or eliminating the minimum wage would instantly create millions of jobs.

EXPERIENCE NOT NECESSARY

It was not too many years ago that the prospective employee would read that or something akin to “will train”. As long as you had the relevant prerequisites, the employer would be happy to train you. This does not seem to be the credo these days. Employers wish you to hit the ground running, expecting your very first day to produce 8 hours of work equivalent to a veteran employee. Training hurts the bottom line, and many companies big and small seem to prefer an empty chair to training costs.

FROM FULL-TIME TO PART-TIMERS

A major problem with the jobs 'created' in the past couple of years, is that a majority of them are part time jobs and not full time. It is easy to blame Obamacare for this peculiar phenomenon, but I do not think so. I think many made the same discovery I did (in manufacturing) that if you cut back a full time employee to part time, the reduction in output is smaller than you might expect than from punching buttons on your calculator. Therefore, they become more efficient.

IN CONCLUSION

Unless there is a radical change in one or more of the above, and I do not expect it, I think that 7-8% unemployment is the new normal, not the 5.8% average since WW2. Get over it.

2 Comments – Post Your Own

#1) On August 24, 2013 at 12:49 PM, TMFVicki (< 20) wrote:

If Cobol is the only programming language you know, you haven't been very employable for decades (certainly through the whole tech bubble timeframe).   It might be time for you to go back to school and learn the current technology.

 As for folks south of the border stealing jobs.   Again, the unemployed don't tend to want to pick or pack fruit for a living (and they aren't very proficient at it).   They have had an ongoing experiment in the southern United States and, it's been very bad for the food industry. 

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#2) On August 26, 2013 at 11:30 PM, jerryguru69 (96.48) wrote:

 

“As for folks south of the border stealing jobs.”

Point in fact, they are. I once dated a woman who, in the 60's or 70's in the Coachella Valley, was part of a program for summer jobs for college students: they took a busload where they spent the summer as field hands. It was hard, grueling work (not to mention a couple of funny stories about sweat, but this is a family website), but room and board charge where nominal and it turned out to be a pretty good deal. In those days, there were virtually no illegal Mexicans. Then came the Bracero program, then the “contractors” . The farm owners (many what we would these days call agribusiness) prefer the latter, since they were willing to work in sub-legal work conditions at sub-legal wages. I recently heard a strawberry farmer lament that if he had to employ union labor (and it is available for these types of jobs), the price of strawberries would double. Most people have forgotten that Cesar Chavez' goal was to organize the field hands into AFL-CIO unions (seeing produce at the market labeled “proudly picked by union labor” used to be a badge of honor). As an investor I cheer these cost-cutting efforts, but as an ethical investor (viz Google, Whole Foods, Starbucks) I jeer, since they are screwing American citizens. Kinda like discovering that your beautiful, shiny iPhone is being assembled in China under near slave labor conditions by FoxConn. I repeat: there are plenty of willing workers, but not necessarily at the wages you wish to pay.

Actually, I was thinking of food, service, and hospitality jobs. These are the jobs that young, especially minority, get their very first job, no skills,no work experience. These day, the jobs are being filled by 40yo illegals: teens and twenties have no chance at these jobs, which is where I got my first jobs. There are some restaurants and hotels where speaking Spanish is a requirement, since almost the entire staff speak no English. Here is your homework assignment: on 5 separate days at 5 different McDonalds, have lunch around noon at a table closest to the cashiers, and listen for ½ an hour. Then, tell me what % of the conversations by the employees are totally in Spanish.

“If Cobol is the only programming language you know, you haven't been very employable for decades (certainly through the whole tech bubble timeframe).”

Factually incorrect. I was so employed past the bubble. I lost my job when my Fortune 500 company outsourced the entire IT department to India. Not all S&P 500 companies have gone to the “cloud”. Those that haven't still need overnight batch. There are plenty of those with the necessary skills, but not at the wages they are willing to pay. The push for H1B visas is simply an attempt to lower wage costs to company: same comment as above about agribusiness.

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