New Assumptions for a New Era

The current downturn has helped to undermine many of the assumptions that people once had. It taught them that keeping up with the Joneses -- especially if it depends on borrowed money -- isn't necessarily in their best interests. They learned that the financial institutions that loved them during the good times are quick to turn tale when circumstances change. They figured out that many of the so-called experts are anything but. Hopefully, they're also realizing something else: those who've been out of work for a while are not necessarily in that position because they deserve to be, as the Christian Science Monitor suggests in "Unemployed for Six Months or More – and Still Looking for a Job":

The number of long-term unemployed – 6.1 million – is the most since the US started keeping track in 1948. Here is a look at some of these people as they search for a job.

Over the past two years and four months, Denise Sims-Bowles has sent out 273 résumés – each of them tracked on a spreadsheet on her computer.

But the resident of Pasadena, Calif., who has more than 20 years of work experience, has yet to land a position in the soft Los Angeles job market.

"It's not that I don't have skills," says Ms. Sims-Bowles, whose job entailed taking everyday tasks and automating them. "I look for a job every day, and every day I have the door slammed – hard. To be honest, it's hard to remain positive."

Sims-Bowles is one of the long-term unemployed, a group that has been growing every month since at least late 2007. These individuals have been out of work so long that it's hard for them to explain to potential employers why they are still pounding the pavement. Many have exhausted their connections, and, like Sims-Bowles, they're getting doors slammed in their faces.

Many of them have resigned themselves to jobs with lower pay and responsibilities – or they've dropped out of the workforce entirely because they are convinced there is no job for them.

"It's one of the riskiest byproducts of this recession – that we may have a segment of the workforce who may feel so disconnected and forgotten that they feel like there is nothing out there for them," says John Challenger, chief executive officer of Challenger, Gray & Christmas, an outplacement firm in Chicago. "These are productive people who have been put into some kind of space where they are outside in the cold and cannot get back in."

In December, 6.1 million people – some 40 percent of the people who were unemployed – had been out of work for six months or longer, the Department of Labor reports. This represents the largest pool of the long-term unemployed since the Bureau of Labor Statistics started keeping track in 1948.

On a median basis, the typical duration of unemployment is 20.5 weeks – double the amount of time in the 1982-83 recession.

The ripple effect

Long-term unemployment has broader ramifications for the economy. For one thing, consumers are concerned that if they lose their jobs, they'll be unemployed for a long time. Such concerns have led to relatively weak readings for consumer confidence, says Mark Zandi, chief economist at Moody's Economy.com. Weak confidence means that consumers spend less money – not a good thing for a consumer-driven economy.

In addition, long-term unemployment is an indicator that permanent, structural changes have taken place in the economy. Structural changes can make it much harder for the economy to recover – and for job seekers to adjust.

"Longer term, one of the impacts of structural unemployment is that many of these workers are losing skills, which makes them much less marketable and makes it much tougher to get back," Mr. Zandi says.

Yet compared with the Great Depression, today's unemployment problem seems mild. By the winter of 1933, an estimated 12 million to 14 million people, or 25 percent of the workforce, were unemployed. Six years later, the unemployment rate was estimated at 17 percent.

"My sense is that most people were unemployed for the long term," says David Kyvig, distinguished research professor at Northern Illinois University in DeKalb and an expert on the Depression. "Everyone was desperate to hold on to a job, so no one was changing jobs."

One survey, Professor Kyvig says, showed that 35 percent of the population under age 25 was unemployed in 1931. That was before the 1935 Social Security Act, which required states to pay unemployment compensation to those who qualified.

Extension of unemployment benefits

Since July 2008, Congress has voted four times to extend unemployment-benefits programs, so that some without jobs can receive additional weeks of help. Congress passed the most recent extension last month. It also continued a $25 weekly supplement, available to all 10.8 million benefit recipients.

According to an analysis by the National Employment Law Project (NELP), the December extension allowed some 2.3 million to continue receiving unemployment benefits. It is scheduled to expire in February.

"Ideally, we would like to see these benefits continued through the end of the year," says Christine Owens, executive director of NELP in Washington. "Otherwise, we will again be in a situation where millions of unemployed workers would reach the end of their benefits and would just fall off a cliff."

For many of the long-term unemployed, the extension of benefits is crucial. "They are keeping my family afloat," says Sims-Bowles in Pasadena. "The $425 a week that I'm getting basically pays for food and gas and incidentals. I feel very blessed to have anything."

Those out of work for a long time have learned to scrimp. In Framingham, Mass., discretionary income is very limited for Kate Corrigan, who was laid off nine months ago from a recruiting job in the high-tech sector. "You don't go out to dinner, you don't take a vacation, you are very watchful of everything you do," Ms. Corrigan says.

When a job is advertised, the competition is fierce. Nationally, there are 6.3 job seekers for every job opening, NELP estimates.

Sally Kennamer, who has been out of work since August 2007, has experienced that firsthand. The resident of Grand Rapids, Mich., who is searching for a job as an administrative assistant, estimates that she's sent out thousands of résumés. But she's had only three interviews.

If she could get a foot in the door, she says, she would tell potential employers that she's loyal and that in her nine years at her prior job, she missed only two days of work because of illness or other personal matters. "But I'm competing with so many people, it's hard to tell your story," she says.

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Comments

[Omitted Kingdom]

If "Republican tax cuts create jobs" were true, and it is not, there would have been NO job loss from 2000-2006, when the US had a Republican Congress and a Republican in the White House. The job loss was massive and monthly from 2000-2006.

Next, you need to ask your elected representatives for black and white proof that the 10 billionaires in the US, Gates, Buffett, Ellison, the Walton family, and Dell, are doing to create small businesses in the US that hire US citizens. If they are not, then they need to be taxed at confiscatory rates. The IT billionaires have sent IT jobs offshore to India. They should be responsible for the US workers they left behind, then and only then should the US government provide backup. If it bankrupts Microsoft, Oracle, Google, Dell, etc., then they succumbed to creative destruction and can easily be replaced by IT professionals and software companies in India.

[shargash]

Omitted Kingdom, I think we've been in a recession since 2000, but it has been disguised by all the number fudging (GDP & GDP deflator especially). The only things that have been growing during that time have been the military and financial services, the latter of which has become a cancer on the real economy.

[Matt]

Why do we have the highest business taxes? Keep in mind JFK and Reagen cut taxes...

[Omitted Kingdom]

Connect the dots in two new directions: let's see who, what, when, where, and why Bill Gates and other CEOs visited Congress to maintain H1B and L1B visas at the same time US jobs were shipping offshore. Then James O'Keefe, when he finishes visiting ACORN and Mary Landrieu, turns his attention to visiting military offices around the world to see who's goofing off.

[Luke]

The most dangerous is the man who has nothing left to lose. This depression will define the young, destroy the old and devastate those in between.

I've lost count of all the resumes I've sent out and have given up finding anything of substance. Currently seriously underemployed. At my second part time job I hear daily from those who been set adrift and recently laid off, "eliminated", or whatever term the MBA has creatively assigned. It will destroy the family and its relationships.

They have no idea the train wreck to their self worth which is heading their way. Unemployment barely allows survival. Underemployment barely improves the situation.

At some point I assume I will probably be forced to decide if it is worthwhile to continue living like this.

[roger]

A Manufactures dream
A Bankers dream
A retailers dream
A fully automated operation,FREE of any Labor cost.
Such is the irresistible motivation of profits,
profits for profits sake only
Dear customer,we do it all for you because we love you.

[John R. Sedivy]

There are definitely new assumptions that have resulted from the current economy which you have well stated. Many of the established businesses (especially those propped up by bailouts) had an opportunity to connect with the consumer and small business by working with those in need - this would have likely prompted lifetime loyalty. Instead they changed direction and bit the hands that fed them - if the consumer and small businesses (the backbone of this country and economy) were smart - they should sever their ties with these institutions and take their business elsewhere.

[Speculation]

I think it will take at least 5 years to get back to 2007 employment levels, but probably more like 10-12 years depending upon the state. The recovery would have to be extremely aggressive to get back to 2007 employment levels in 5 years. I dont see the recovery as being all that aggressive.

http://bit.ly/cXVEyO

[The Real Deal]

For many years, even decades, the mantra of US corporations is profit. The CEOs call it shareholders value. Their job is to maximize it. A few generations of business people have been taught like this in MBA schools. Economists, professors, executives, industrialists, even scientists, all bought into this free-market paradigm as the best there is.

Clearly, something is wrong. But what's wrong is not the above thinking. What's wrong is using the above as the ONLY thinking.

What's wrong is not recognizing, dismissing, disregarding that THERE IS A LIMITATION TO ECONOMIC SYSTEM. THAT THERE ARE OTHER PURPOSES IN SOCIETY. THAT A COUNTRY IS FORMED NOT JUST TO MAKE MONEY. THAT THE EARTH IS MORE POWERFUL THAN MAN.

In other words, American leaders have led and managed the country as an Utopian system maximized for personal gains and disregarding everything else. Before long, everybody conducted their lives in the same Utopian delusion. And like all previous Utopian systems, this one results in the same outcome - national suicide.