WASHINGTON, June 27 (UPI) -- Amid the celebrations of the Federal Reserve's thirteenth cut in interest rates, and its consequent prolongation of the housing bubble, one point has been missed: none of this has done much for the unemployed.
Thursday morning, three statistics were released that bore on unemployment. The weekly layoffs total slipped somewhat to 402,000, where 400,000 and above generally leads to higher unemployment, while the number of continuing claims increased to 3,741,000. The Conference Board Help Wanted Index remained flat on 36, on a base of 1987=100, equal to its lowest level in the forty years it has been calculated. Monthly mass layoffs ticked up to a total of 1,699 incidents for a total of 173,784 layoffs, slightly below May 2002 but well above the average of that year.
Next Thursday, July 3, the monthly unemployment statistics are due to be announced. It is generally believed that there will be around zero job creation, where 150,000 per month is needed to stabilize unemployment, and that the unemployment rate will tick up from 6.1 percent of the workforce to 6.2 percent.
The most alarming feature of the statistics is the number of unemployed who stay that way. Continuing claims for June 14 were 3.74 million, close to record levels and considerably higher than in the early 1990s. While the number of claimants of unsatisfied job seekers in the workforce has been more or less constant over the last several years, it is very clear that for many people it has become much more difficult to find a new job than has historically been the case, as "downsizing" in executive ranks combined with outsourcing in manufacturing has produced structural job losses that are more serious for participants than the normal cyclical swings. The appallingly low level of "help wanted" advertisements is further evidence of this.
Sectorally, new jobs have been concentrated in a few areas. In the two years since May 2001, 500 thousand new jobs have been created compared with the 3-4 million needed to absorb new workforce entrants. Sectorally, 1 million managerial and professional jobs have been created (we always need new bureaucrats in the public sector!) and 1.5 million more service jobs, while construction and maintenance jobs have increased modestly, by 400 thousand. On the other hand, sales and office jobs have declined by 400 thousand, production jobs by a shocking 1.3 million -- 12 percent of the existing production workforce -- transportation jobs by 400 thousand and farming and fisheries jobs by 300 thousand.
Also important is the increase in employment for workers of 55 and over, from 19.926 million in May 2002 to 21.028 million in May, 2003, an increase of 5.5 percent, compared with an increase of only 0.6 percent in overall employment over that year a drop of 3.5 percent in employment of 16-19 year olds and a flat employment trend among adults 20-54. Looking at sex differentiation, the most startling factor is the increase in female over-55 employment in the year from 9.038 million to 9.862 million, an increase of 9.2 percent, particularly surprising in a period when employment overall, is stagnant.
This is just an accentuation of a trend that has been active for a decade or more. In the ten years to May 2003, employment of over 55s has increased from 14.513 million to 21.137 million, an increase of 45.6 percent, and among women over 55 it has increased from 6.312 million to 9.812 million, an increase of 55.4 percent. Among younger workers, this trend is simply not visible; in the last ten years employment of 16-19 year olds has increased only from 5.810 million to 5.907 million (1.7 percent) of 20-24 year olds from 12.713 million to 13.310 million (4.7 percent) and of 25.54 year olds from 87.352 million to 97.398 million (15.0 percent.)
Of course, birth and immigration data have something to do with this, in particular with the increase in the 25-54 year old workforce. But there is no way that birth and immigration data can explain the huge increase in participation among 55+ year olds. Instead, there is another explanation, the decline in the defined-benefit pension scheme, which has come to cover a rapidly decreasing share of the U.S. workforce in the last decade. Theoretically, this was replaced by money-purchase schemes, such as 401(k) plans, part of the cost of which was funded by employees. In practice, U.S. savings habits are so poor that the need to fund pension contributions themselves has simply been neglected by the U.S. workforce, with the result that these people continue to need to go out to work at an age when older cohorts were fully retired.
This demonstrates, if nothing else does, that the U.S. economy is going to run into serious difficulties as the baby boom generation passes normal retirement age of 65, and finds itself without either an adequate pension or the ability to continue working effectively. They will continue to demand jobs, which they will decreasingly be able to fill adequately.
It's a gloomy picture. Unemployment continues to rise, and as the years drag on the ability of the already unemployed to find work diminishes. While the money pumped into the economy has provided employment opportunities in construction, services and the public sector, it has not slowed significantly the rapid decline in U.S. job opportunities in manufacturing. Meanwhile a graying baby boom generation is caught between their need to continue working and the lack of jobs which they are capable to fill.
It's not a problem that is going to be solved quickly. And it may, in the end, cause as much misery to the U.S. people as did the 1930s, but this time largely concentrated among the older population whose savings have run out rather than among young families.
There is an economic hysteresis effect in bubbles; a bubble that inflates and deflates leaves the overall economy much weaker than if it had gone along a steady path without a bubble. That weakness is manifesting itself in the unemployment data, and the outlook for millions of Americans is thereby grim indeed.