Thursday, May 30, 2013

Unemployment: "The Conveyor Belt Theory"

Today I received an email asking: "Here is what confuses me, perhaps someone can better explain. Every Friday the Labor Department comes out with the numbers for NEW claims for unemployment insurance. So if for example, if we are averaging 350,000 claims a week, every week, for NEW applicants, does that not also mean that over 1 million jobs are lost every month?"

My reply was:

I once likened the unemployment rate (the number of people unemployed) to a conveyor belt, and why the unemployment rate has remained near-unchanged for so long.

The conveyor belt represented the unemployed, and as people were losing jobs, they were put on the beginning of conveyor belt (for a certain length of time), until such time, they came to the end of the conveyor belt (when they exhausted all UI benefits and eventually were no longer counted.)

As people were first getting on the conveyor belt (the unemployment rate) people were also falling off the conveyor belt...and the number of people who were still on the conveyor belt remained relatively the same throughout the last several years.

That would also help to explain why, as more and more people become unemployed (without every finding work again) the labor participation rate also declines (and partly because people are taking early Social Security retirement, going on SSDI, or dying).

The number of jobs created verses new high school graduates bears this out, as job creation isn't keeping up with natural population growth. But yet, we continue to outsource jobs and approve new "guestworker" programs. See my post: Exporting America's most Vital Resource, Jobs (This post continues below)

Many of the jobs that ARE being created, are part-time and/or low-paying jobs and/or temp jobs. That's why there are now 8 million Americans working multiple jobs.

That's also why we have such as HUGE problem with long-term unemployment. Times are so bad that, recently, a tent city sprang up in New York City as people were camped out in line waiting for a job application. There were at least 750 applicants for only 75 job openings.

THE DAILY BEAST: "Under the Rubio-Schumer immigration reform bill, millions of non-Americans will suddenly gain access to vast new reaches of the U.S. labor market. Immigration flows will accelerate, including guest worker flows. The bill guarantees—is intended to guarantee—ultra-slack labor markets across a wide variety of specializations for years and decades to come. If you're a 55-year-old laid-off worker who holds any reserve expectation of ever again enjoying the standard of living you had before 2008—a.k.a. "attitude"—this bill ensures that you will never, ever work again."

BLOOMBERG: Long-Term Unemployment Is Turning Jobless Into Pariahs - Recently economists in both camps have come to agree that the stigma of long-term joblessness is, by itself, causing persistent joblessness -- from college educated white collar workers to unskilled blue collar workers. The U.S. is in dire danger of having a permanent class of long-term unemployed.

THE ATLANTIC: Why Washington Saved the Economy, Then Permanently Destroyed the Labor Market - "Comparing Washington's reaction to the banking crisis and the unemployment crisis shows how and why government focuses on the rich and ignores the rest."

My Related Posts:

Congress Still Ignores Long-Term Unemployed

America's Bleak Jobs Outlook

Long-Term Unemployed: "Tainted Goods"

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