Louis Uchitelle Looks at the Long-Term Unemployed

The reliable Louis Uchitelle looks at the distressingly-high level of long-term unemployment:

The New Profile of the Long-Term Unemployed - New York Times: After three years of unemployment, Allen Gruenhut finally landed a job as director of human resources for a company in the stone business on Long Island. His age, 53, worked against him in his long hunt for work, he contends, and so did the six-figure salary he earned at his last job, in banking. "They would not take me seriously at job interviews when I said I would be happy with a lower salary," Mr. Gruenhut said.

Jackie Ellenwood, 31, is still without a job. She worked for three travel agencies over 13 years, until her last job, in Allen Park, Mich., ended in a layoff nine months ago. The industry is shrinking in response to more Internet bookings and cutbacks in corporate travel so Ms. Ellenwood is looking for work elsewhere and studying to become a nurse, confident that health care will continue to expand in an aging America. "I'm going to stick to my nursing courses," Ms. Ellenwood said, "even if I get a job."

The experiences of Mr. Gruenhut and Ms. Ellenwood help to explain why many of the nation's unemployed are still struggling to get back to work. Not since World War II has long-term joblessness - the percentage of the unemployed out of work for six months or more - been so high for so long after a recession has ended.... Several factors seem to be contributing to the rise in long-term unemployment. The swelling cost of company-paid health insurance is "inducing business to be less aggressive in its hiring," said Mark Zand.... The baby boomer bulge working its way through the labor force also plays a role; as this large group of workers ages it becomes harder for some who lose their jobs to find new work suited to their skills....

"It looks like employers are very hesitant about the future of the economy," said Lawrence F. Katz, a labor economist at Harvard. "It may be that we will fall into another weak economic period before we get a good recovery and really robust hiring." After World War II, when traditional industries dominated the economy, the usual pattern was for long-term unemployment to surge during recessions and die away quickly as recoveries took hold. That changed during the early 1990's and is even more evident in the current recovery, which began in November 2001. Rather than subside as growth resumed, long-term unemployment as a share of total joblessness continued to rise, according to the Bureau of Labor Statistics. It peaked 17 months ago at 23.3 percent and has only gradually tapered off since then, to 21.2 percent in April....

Toyota Motors of North America, whose sales are rising more rapidly than other automakers in the United States, is holding back on hiring although its plants are operating flat-out. Its payroll, said Dennis Cuneo, a senior vice president, has grown by only 600 jobs this year - all of them at newly opened plants - to a total of just over 32,000 employees. Existing factories continue on two shifts a day. Overtime and reconfigured work schedules help to squeeze out more production, without adding third shifts and the hiring that the additional shifts would require. "We are reluctant to bring people on immediately," Mr. Cuneo said. "We are going to wait and see what we can still get from improvements in productivity. If the demand is sustained, there will come a point where you have to add a shift."...

Sixty-six percent of the working age population was in the labor force in April, down from 66.7 percent at the start of the recovery. That is 1.6 million missing people, enough to raise the unemployment rate to 6.2 percent from its present 5.2 percent - if they all showed up....

Comments

[Carl]

Re: "The reliable Louis Uchitelle looks at the distressingly-high level of long-term unemployment:"

Good article. I've viewed long-term unemployment closer up than LU, and, believe me, it's even more distressing than depicted here.

[me]

In five weeks it will be 3 years since IBM offshored my job to India. I have had some interviews and one offer for less than half of what I made.

Just in last Sunday's paper the advice was given to leave off grad school unless it was needed for the position since companies are not willing to pay for it.

Mid-50s doesn't help either.

[pgl]

As he notes the low labor force participation rate of 66%, others seem to be saying that the mere fact that the unemployment rate is down to 5.2% is evidence all is fine in the labor market. Louis - thanks for lending your voice to the reality based community!

[Steve Consilvio]

Here's an interesting tidbit.

The AFL-CIO lost $23 Billion in investments between Enron and WorldCom. At minimum wage, and a working life expectancy of 45 years, that is the equivelent of the LIFE-TIME wages of 18,000 workers.

How is it possible for all that labor to disappear in a few short months? Easy. The numbers never had a relationship to reality.

$23 Billion, of course, is just a drop in the bucket to valuation changes that occur in the Stock Market. Everything that goes up must fall, but we keep trying to build empires with numbers anyway. There seems to be no understanding that numbers represent people.

People get hired, fired, and passed over because of the numbers. We need numbers on our car, our license, our house. Everywhere there are numbers, and nobody can make them add up because everyone believes that 2+2=5.

An good investment is 2+2=5
A downturn is when 5=2+2
One always follows the other.

Is it a coincidence that those who make the rules (lawyers) make so much money? Or that those who guard the gates to the Ponzi scheme (stockbrokers) do so well?
Or that the government spends more money than any other entity on Earth? People pay taxes to support the Empire, as always.

Imagine the shockwaves small government would send through banking, investing, insurance and the military-industrial complex. Instead the shockwaves come in a different form: unemployment, poverty and war.

The only reason unemployment works out is because people eventually die. "The Greatest Generation" is consuming the lives of the Baby Boomers with their Social Security benefits, making everyone eventually expendable as deflation somewhere must balance out the inflation elsewhere.

How long until the financial collapse? Does anyone think it can be avoided?

We are throwing away people's lives. First it was the gangs in the inner city. Now it is professionals in the suburbs. Eventually it will include everyone.

Peace,
Steve Consilvio
www.behappyandfree.com

[kharris]

Louis whatsisname (sorry, it's really hard to remember) makes a good point, but he doesn't carry it very far. You get the standard quotes from economists, the standard review of the broad labor market, but only a tiny bit about the causes of long-term unemployment. There is not much evidence of real effort to look into the subject. Reliable but lazy?

[Adam Sacarny]

One of William Polley's recent posts discusses the question of Employment to Population Ratios:

http://www.williampolley.com/blog/archives/2005/05/index.html#000323

Note the staggering 10% decline in E/P among 16-19 year olds. Polley suggests that young people are putting off entering the workforce in favor of getting more education. PGL finds similar results:

http://angrybear.blogspot.com/2005/05/does-early-retirement-explain-decline.html

I wonder whether this article is pointing at the right age group to explain this interesting labor market. Surely you could find a few people with bad employment stories at any time.

Adam

[dsquared]

[Can anyone remember France's disastrous 35 hour work week regulation? ]

Disastrous in what sense? Its introduction coincided with a drop in French unemployment and an increase in French GDP growth.

[pragmatic_realist]

Has anyone done research on the effect that the increase in prison population has on unemployment numbers?

[Yes. Alan Krueger and Larry Katz. It's worth maybe three-tenths of a percentage point...]

[pgl]

Adam - thanks for mentioning my exchanges with Bill Polley. The data we were musing over shows a modest increase in the labor force partipation rate for the 50 plus set, but that is not inconsistent with Louis's and Brad's discussion that some in the 50 plus crowd are having a hard time finding a new position. But you are right - the kids are also having a rough time in this weak labor market.

[scottynx]

[Disastrous in what sense? Its introduction coincided with a drop in French unemployment and an increase in French GDP growth.]

You are right that the French 35 hour work week was not disastrous. Maybe you are right that it coincided with an increase in gdp growth. But correlation is not causation. Regulations like the 35 hour work week should not be given kudos merely because they aren't "Disastrous". Results should be measured against what could have been if the regulations had never been there.

Heres a Simile: Lets say you take mind-numbing illegal drugs before a hard test in school and still pull off a B. Things went Great Right? Of course it was not "Disastrous". But you still hurt yourself in the sense that you could have not taken drugs at all and maybe got a B+ or an A-.

[rakehell]

"Maybe you are right that it coincided with an increase in gdp growth. But correlation is not causation. Regulations like the 35 hour work week should not be given kudos merely because they aren't "Disastrous". Results should be measured against what could have been if the regulations had never been there."

Err, how are you going to acquire that sort of counterfactual data? You can't argue with success, but you could perhaps uncover another source of that success.

Uchitelle: "Today, the unemployment rate is relatively low at 5.2 percent and overall hiring has started to pick up again, particularly for younger workers coming out of college and professional schools."

Fortune recently had a cover story about people out of work at age 50. I am wondering if alot of people in the workforce are really updating their skills much. "Experience," a vague, and hard to confirm or compare asset, always seems to be the default brag of the lazy worker. There is also the explanation that people with more up-to-date educations are more valuable in a rapidly changing technological society.

I was stunned to learn recently that a 50-plus former boss mine of went back to school to get another master's, despite already having a law degree from Harvard and some other amazing credentials. Education is the ultimate way to reduce informational asymmetry. Publishing good writing is another way that I don't think is as well known among people outside academia or journalism. Perhaps that partially explainsthe explosion in blogs.

[rakehell]

"Maybe you are right that it coincided with an increase in gdp growth. But correlation is not causation. Regulations like the 35 hour work week should not be given kudos merely because they aren't "Disastrous". Results should be measured against what could have been if the regulations had never been there."

Err, how are you going to acquire that sort of counterfactual data? You can't argue with success, but you could perhaps uncover another source of that success.

Uchitelle: "Today, the unemployment rate is relatively low at 5.2 percent and overall hiring has started to pick up again, particularly for younger workers coming out of college and professional schools."

Fortune recently had a cover story about people out of work at age 50. I am wondering if alot of people in the workforce are really updating their skills much. "Experience," a vague, and hard to confirm or compare asset, always seems to be the default brag of the lazy worker. There is also the explanation that people with more up-to-date educations are more valuable in a rapidly changing technological society.

I was stunned to learn recently that a 50-plus former boss mine of went back to school to get another master's, despite already having a law degree from Harvard and some other amazing credentials. Education is the ultimate way to reduce informational asymmetry. Publishing good writing is another way that I don't think is as well known among people outside academia or journalism. Perhaps that partially explains the explosion in blogs.

[a different chris]

>Disastrous in what sense?

To the Washington Consensus and neoliberals in general, in this sense:

>Its introduction coincided with a drop in French unemployment and an increase in French GDP growth.

:>

>Results should be measured against what could have been if the regulations had never been there

Good luck with that.

[a different chris]

>I was stunned to learn recently that a 50-plus former boss mine of went back to school to get another master's, despite already having a law degree from Harvard and some other amazing credentials.

Is it just possible that a guy with "a law degree from Harvard and some other amazing credentials" might- and I know this is a stretch - find it a touch easier to position himself financially to brave both the expense and time off necessary to get another degree than say, a guy with a Mech E. degree from State U???

We gotta work with at least the median, here guys. This isn't Lake Wobegon.

[a different chris]

Oh, and speaking completely out of my butt, but I wonder if, as far as monetary concerns go, if the guy would be better off taking his tuition money and time and invest it in a Subway franchise in a new suburb instead?

That's how the America of today seems, to me and my garroulous butt anyway, to have structured its incentives. Follow the bulldozers into low crime, low tax former farmland and sell stuff that's fairly profitiable but still, on a per-item basis, cheap enough for everybody to buy.

Ferget trying to do something interesting. No money in it.

[rakehell]

"find it a touch easier to position himself financially to brave both the expense and time off necessary to get another degree than say, a guy with a Mech E. degree from State U???"

Well, my point being that you'd think that someone like that would not have to go back to school at all. Just how many elite credentials do you need nowadays? Where is the incentive coming from but a verym very crappy job market? And yes, all those median people are out of work for long periods of time ala the Fortune article, at a period in their life when you'd think that they would be kicking back a tad.

[lise]

"Results should be measured against what could have been if the regulations had never been there."

Now, how could we measure what did not exist? We can easily show that the 35 hour work week in France was not a disaster, since the economy increased in growth and employment rose with the onset. Could there have been even more growth and employment otherwise? We can not know what did not happen.

[PaulC]

> Ferget trying to do something interesting. No money in it.

Running a Subway franchise is probably a lot more interesting and personally rewarding than many of the jobs open to new college graduates.

[me]

"Oh, and speaking completely out of my butt, but I wonder if, as far as monetary concerns go, if the guy would be better off taking his tuition money and time and invest it in a Subway franchise in a new suburb instead?"

No matter how much education you get today, someone will find a smarter Indian to work for 10% of what you make.

"Just how many elite credentials do you need nowadays? "
I find that the few I have are too many, too smart, too overqualified, too ..........................

[me]

Here you go, land of opportunity, too bad it isn't the US.

IBM headcount in India close to 25,000
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Thursday, May 19, 2005

BANGALORE: IBM's headcount in India is inching closer to the 25,000 mark as the firm has ramped up its operations aggressively over the last few quarters.

IBM increased its India employee base to 23,000 as of end-2004 compared to 9,000 at end-2003, a growth of about 150 percent, said Shanker Annaswamy, Managing Director, IBM India. The company continued to grow its employee base, Annaswamy said.

Though bulk of the growth in headcount was on account of the acquisitions that IBM did in 2004, the company has been adding more people in India to execute the increasing number of off shore projects. The buyouts included the $170 million Daksh eServices deal that brought in about 6,000 employees into the IBM fold.

Also the acquisition of Rational and Trigo, which had development centers in India brought in several hundreds of developers into the IBM fold.

Considering the fact that the company has been aggressive in moving jobs overseas, especially to countries such as India and China, and the ramp-up happening on an ongoing basis, IBM's headcount in India could have easily crossed the 25,000 mark till date.

http://www.siliconindia.com/shownewsdata.asp?newsno=28157

[Michael Cain]

> Well, my point being that you'd think that someone like that
> would not have to go back to school at all. Just how many elite
> credentials do you need nowadays?

Since it was unspecified, at least consider the possibility that his current elite credentials don't match at all what he wants to do at this point in his life. I had a lovely 25-year career in high-tech, but after getting caught on the wrong side of an industry consolidation, I'm working on another Masters because (a) I had the chance to and (b) I don't want to do high-tech any more, or at least not work on the same aspects of it that I did successfully for many years.

And yes, there are certainly days when I have the feeling that trying to do something completely different starting at age 51 will turn out to be one of the dumber things I've attempted. OTOH, if we're all going to have to work until we're 75, then society is going to have to figure out a way to let people change gears completely much later in life.

[a different chris]

>Well, my point being that you'd think that someone like that would not have to go back to school at all. Just how many elite credentials do you need nowadays?

I misread you, we are apparently pretty well aligned. And yeah, to the other commenter, I sometimes wonder if running a Subway would be better than cranking out TPS memos. I personally would like to restore old cars, and better yet Industrial Age stuff. I can make a half-assed weld at this point and have gained just enough knowledge of steam tech to scald myself...

Anyway, this makes sense, too:

>if we're all going to have to work until we're 75, then society is going to have to figure out a way to let people change gears completely much later in life.

I'm not really an inherent radical, I'm currently radicalized by the fact that the people that say things like "this change is inevitable" and when I say, enquiringly, "OK?? ... they have absolutely no sensible plans for how society is going to utilize some still-decent brains. It's supposed to "just happen" which would be a first in history, IMHO.

Even on a plane plummeting towards the ground, people aren't going to jump unless somebody hands them a parachute. We'll just freeze and maybe scream a bit. Sorry if the noise disturbs the tenured, but can't help it.

[ken melvin]

First, there's no doubt that they have disappeared some five million workers to get their 5.2%. It well may be seven million disappeared. Even using Elaine's numbers it's more than three million.

This is not the first time, happened back in the sixties when automation first struck, plants be gain to move south to escape unions and environmental laws, etc. People in congress still remember how 'twas done, Elaine's husband amongst them. Slight adjustment, no problem, mostly urban blacks (back then some still called them niggers). Now, its union workers, engineers, programmers, doctors, workers over fifty that are the new niggers that everyone pretends don't exist. If they succeed in this disappearing (so far they are (with more than a little cooperation from the media)), hence forth for as long it works, a ratio equal approx. 140/280 (e/P ~ 50%) will be the new standard.

How did this come to be and why the great denial? Came to be because of automation and globalization. And, no one had an acceptable solution. How did industry get by with this in a democracy? No one seemed to understand what was going on so all that was necessary was provide a rationalization people could use. Love the one about markets; man, that explains it all. Within the markets beauty, there's this schtick about immigrants doing the work no one else will. What's not to love about a positive feedback loop? Get wages low by using illegal immigrants, then nobody else can afford to work the job and voila'.

But these are Americans being put out of work. A lot of them are even white. How can Americans stand still and let this happen? Lot easier long as they don't know. Get a lot of those working strung out and paranoid and they are less likely to worry about the other guy. Especially if you brain wash them with some libertarianism crap. When it takes husband and wife both working, what you pay nannies and daycare, what you spend at Jacque in le Box , Starbucks,, . . matters. Hell, even if they are Americans, its their fault if they can't get a good job and if they lost a good job they could spend $30-50K on another degree (which would allow them to compete with someone half their age).

[Jason]

The economic data, both raw numbers and derived figures of merit, shouldn't be trusted all that far. Sad to say, but the unemployment rate and every other measure of labor action is being manipulated for political gains in a way that is really quite extraordinary. The BLS should be nonpartisan and most of all, accurate. That does not square with facts. There is considerable debate in the BDL's blog archives concerning just how skewed the numbers really are, butthey are skewed, and much more so than is "normal". Hence the preoccupation with the household survey and other less reliable/controllable methods of gathering from last year. Surely everyone remembers that?

[me]

"Sorry, but this is all so lame. I'm 47, and grew up "

What is lame is anyone that thinks that the 50,000 fired by IBM since 2002 and countless other at HP and MCI and just about everyone have found better jobs. The average age the IBM fires you is 53 so enjoy your next 6 years while you can.

It is "lame" to consider these people "anecdotes".

[anne]

ME

Thank you :)

[scottynx]

[Now, how could we measure what did not exist? We can easily show that the 35 hour work week in France was not a disaster, since the economy increased in growth and employment rose with the onset. Could there have been even more growth and employment otherwise? We can not know what did not happen.]

I will concede that we can't measure what never happened. The main thing I wanted to say was that "not causing a disaster" is too low of a bar to use in judging the merits of policies, whether they are advocated by the left-wing or right-wing.

[chris]

Subway, location, location, location, that shop will make a big difference between struggling to break even and florishing depending on where it is even in the same town or the same street. Don't count on the Subway DA to tell you whether in his opinion your designated store front will work or not. He might be in competition with you if he/she has stores of its own. About six years ago I opened a Subway in Taipei for a lot of reasons, a couple were it would be good to try to make lots of small sales rather than a few big sales (supposedly what I'm trying to do at the day job) and another was to sell some American stuff here. No matter how hard we tried my Dutch partner and I were always a little underwater. As for getting an education later in life when I was at Subway U the first time I plunged my hands into the shredded lettuce I was thinking oh boy, oh boy, what did I get into? It was the first time for me to be in the food service industry since college summer jobs 20 years earlier. the entire experience made me wonder how honest the American guy, Subway DA, is, and made me aware how tough it is to sell American.

With the right location a Subway can be a good money earner, but the owner has to value the 50 or more hours a week they work there at roughly minimum wage to see a decent return.

It's sad to expect 40 and 50 year olds to be ready to retrain themselves. One decade everyone should be working hard to pay the big bills, kids tuition, mortgage. The other decade people should be making the final sprint for savings for retirement luckily we won't have social security to help out.

It's not an opera it's the jobs birth/death production.

[chris]

IBM has been dying a slow death for years. During the internet bubble years their hardware sales were growing only 3% a year as I read elsewhere. Hardware is proprietary for them and a source of outsize profit margins where high growth rates and big margins are the reason to invest by buying tech stocks. Sun Scott McNealy said services are where computer makers go to die; anybody can hire bodies to do services and where anybody can do the work margins aren't going to be special. Dave Hickey in his "High Tech Strategist" put out a chart showing tech service outfits by customer satisfaction, out of about a dozen companies IBM was at about 8th.

If only we could export nail care salons and tech support service packages we would be doing great. The other night I walked by a computer shop and saw three PCs on display in the front window. There was a HP machine at about $550, a gray machine at $500 and an IBM machine without a price. It's all the same thing with parts in a gray plastic case, probably all assembled by the gray machine co.. the value of the American brand HP or IBM being worth practically-well whatever it's worth it's going to be worth less next year. Lou Lou the Elephant Who Can Dance successfully lowered research spending, managed the co. into lower tax brackets, claimed gains on the underfunded pension pool as profit, moved the company into services, jiggered jiggered the books and today the co. is struggling. This weather report has been coming clear for years but they have been doing a good job of managing expectations. Watch out for Ricardo's iron law of wages, did I get that right?

[Don Quijote]

>>Sixty-six percent of the working age population was in the labor force in April, down from 66.7 percent at the start of the recovery. That is 1.6 million missing people, enough to raise the unemployment rate to 6.2 percent from its present 5.2 percent - if they all showed up....

>>as anyone done research on the effect that the increase in prison population has on unemployment numbers?

[Yes. Alan Krueger and Larry Katz. It's worth maybe three-tenths of a percentage point...]

So without trying to hard we can say that the unemployment rate is 6.5%.

[me]

While IBM is an example I have personal knowledge of, I did say all companies. Take a survey on this board and ask how many have more employees working at their company in the US today than 4 years ago. The second question would be when was the last time a person in their mid-50s was hired into their department. Excluding academia.

[Tom Cecere]

[As of the end of 2004, the mean duration of unemployment was 19.3 weeks--a level exceeded during the 1982-1983 business cycle trough, but not otherwise since the Korean War]

Fine, but I'd like to see a chart that has the 40 year history with an overlay of the time periods when unemployment insurance ran for 13 weeks, 26 weeks, and longer, to see when any "moral hazard" effects are in play. I can certainly match any anecdotes on one side with anecdotes about people taking the summer off and still having 3 months to look for work. As if that was real analysis.

[IIRC, extend unemployment insurance from 13 weeks to 26 weeks, and you add about 0.4 percentage points to the unemployment rate and about 2 weeks to the mean unemployment duration. It's there. It's not a huge player, IIRC.]

WRT IBM, I'm not sure what "me" and "Anne" want -- an admission that IBM and HP had too many highly paid employees (true) or my agreement that they are somehow not subject to the same competitive pressures as medium and small companies (false). And, yes, I've personally hired people over 50 from IBM and made a boodle with them.

[me]

"And, yes, I've personally hired people over 50 from IBM "

So you are one person that cliams to have more employees in the US than 4 years ago, and to have hired people in their mid-50s.

How many others.

And why do you two get hung up on IBM and HP. I said other companies - Nortel, MCI, Sprint, AT&T, Bellsouth, Sun, EDS, the airlines. So who is hiring the 10s of thousands that were fired? That's what "me and Anne" want to know.

[Tom Cecere]

ME -

I'm sure, from following your posts, that you already know the answer to your question: Most of the people, if not all, laid of from big companies find somewhat (or substantially) lower paying jobs at small and medium companies. AT&T may lay off 10,000 at once, but then 10,000 openings are eventually filled. The issue of pay is real; most people at companies like the ones you mention delude themselves into thinking that "they're worth it" and they manage their lives on that (or more) money. Sad.

Nonetheless, unemployment has been steady for years at 4-5.5%.

[Nope]

[billp]

"The laid-off are cut loose from their moorings and rarely achieve in their next jobs a new and satisfactory sense of themselves," he writes in the book. "Layoffs damage companies by undermining the productivity of those who survive but feel vulnerable, as well as the productivity of those who are laid off and got jobs again."

In addition it upsets some who may do something about it.

[billp]

"The laid-off are cut loose from their moorings and rarely achieve in their next jobs a new and satisfactory sense of themselves," he writes in the book. "Layoffs damage companies by undermining the productivity of those who survive but feel vulnerable, as well as the productivity of those who are laid off and got jobs again."

In addition it upsets some who may do something about it.

http://mywebpages.comcast.net/bpayne37/index.htm