Skip to comments.The free market is not up to the job of creating work (Mort Zuckerman: Get Used to 10% Unemployment)
Posted on 10/21/2009 6:12:15 PM PDT by Libloather
The free market is not up to the job of creating work
By Mort Zuckerman
Last updated: October 18 2009 19:21
America has always been a country that thrives on hard work, thrift and self-reliance. We have all absorbed Benjamin Franklins maxim: Early to bed and early to rise, makes a man healthy, wealthy, and wise.
This helped create jobs. In an application of Schumpeters notion of creative destruction, the US lost 44m jobs in the last two decades of the 20th century, but simultaneously created 73m private sector jobs. A stunning 55 per cent of the total workforce was in new jobs by the turn of the century, two-thirds of them in industries that paid more than the average wage. This is no fluke. It is because we benefit from a unique brand of entrepreneurial bottom-up capitalism.
Today there is no evidence of job creation. Quite the opposite: unemployment is rising and millions of jobs have disappeared. In place of thrift we have become a nation of debtors, staggering beneath mortgages that exceed the value of our homes, and credit lines that exceed our ability to repay. But the Great Recession has also changed the nature of unemployment, making it harder for those out of work to find a job. Only by investing in infrastructure and innovation can we mend the system.
About a third of the 15m jobless have been out of work for at least six months. This is the highest proportion since records began in 1948. Meanwhile, those in jobs find their work week reduced to an average of 33 hours, again the lowest in 60 years. Firms are cutting hours, wages and benefits rather than laying off still more workers. Today all elements of labour income jobs, hours and wages are under pressure.
Many Americans who lost their jobs now have no way to replace their lost income. Take unemployment benefits, which pay about a third of the lost salary, up to a cap. Generally, the requirement for the benefit is to have worked full time on the last job for at least a year. But more than half the unemployed do not qualify because they had been in their jobs for less than a year before the axe fell; or worked part-time; or were independent contractors. Only 43 per cent are eligible for unemployment benefits. Even for them, the anxiety is intense: 61 per cent worry their benefits will expire before they find a job. This is driven home by the dramatic increase in those dependent on food stamps, up by 6.2m since the recession began. Food stamps now feed a near-record one in nine Americans.
These men and women are well aware that long-term unemployment will make them harder to re-employ. Their fears are justified: there are now nearly six people available for every job opening up from 1.7 per opening when the recession began.
The mix of the labour force has also changed. The proportion of over-55s working has risen 8 per cent. They felt forced to keep labouring away because the value of their homes and investments declined. In fact, 63 per cent of workers aged 50 to 61 expect to delay retirement, thus restricting openings for younger workers. During the last two recessions, those in their mid-40s to mid-50s showed employment gains, while younger workers bore the brunt of cutbacks.
Of course this time younger workers have not escaped a quarter of teenagers, about 1.6m youths, are without work. The unemployment rate for young Americans has exploded to 52 per cent, a post-war high. But even the 45-to-54 age group has seen job losses, with employment down by more than 1.2m. These are people who should be in the prime of their wage-earning years. It will take these older workers longer to find jobs; some will have to settle for considerably less pay.
Another consequence of the prolonged recession is that many more men than women have lost jobs, probably because women are paid less. Womens share of the workforce may have reached a record 50 per cent last month as a result.
Alas, the prospects for re-employment are diminished by the fact that many jobs may never come back, for example in finance and car manufacturing. This means growth alone will not fully employ America again. If there is any growth in jobs, it will come mostly from healthcare, education, restaurants and hospitality services. Healthcare alone made up all the net jobs created in the last decade. Such service jobs cannot, however, support growth and innovation.
We knew the skies had darkened but now we learn the unemployment figures are worse than previously thought. This is the only recession since the Great Depression to wipe out all job growth from the previous business cycle. The broader measure of unemployment, the household index encompassing people who are unemployed and underemployed, has reached a record 17 per cent. The household survey revealed staggering job losses of 785,000 for September. It includes about 571,000 people who dropped out of the workforce last month, presumably because they despaired of finding work.
Similarly, unemployment for the 12 months to March was understated by 824,000. The US lost about 3m jobs in the first three months alone. Jobs have been lost for 21 months in a row, the longest losing streak since publication started in 1939.
The US Bureau of Labor Statistics limits the official unemployment rate by its definitions. For example, if people stop looking for a job for four weeks they dont count as unemployed. Absurd! An estimated 2.2m discouraged workers thus are not counted in the unemployment numbers. Were they included, the unemployment rate would be 11 per cent, not 9.8 per cent and this does not include another 1.8m who retired or became stay-at-home parents.
The official rate does not include 1m people who once worked in residential construction, where three-quarters of jobs have been lost. These people did not show up on the employment rolls when they were working, and do not show up on the unemployment rolls now they are out of work but they are still (illegally) in the country. Nor does it include approximately 2m people who have entered the labour force since the recession began and are still without jobs. If it were not for short-time working, the same work could probably be done in the normal work week with 3.5m fewer staff, which would drive the unemployment rate up another 2.5 percentage points.
No wonder job anxiety has soared. Soaring unemployment numbers have undermined the confidence that we might be nearing the bottom of the recession. The outlook is bleak. If there is a recovery, firms will fill additional work loads by adding hours to the truncated work weeks.
Since spending depends on employment it is critical to determine whether the labour market will remain weak. Given the level of household debt, the drop of confidence, the decline in the value of homes and the tightness of credit, it is hard to see how consumer spending will rise enough to improve economic prospects beyond a weak recovery which creates few new jobs.
Labour markets have not faced such problems in more than 70 years. The official unemployment rate will shortly cross 10 per cent. Half of US retailers say they will be adding fewer seasonal jobs this holiday season. We may be looking at long-term, double-digit unemployment with official unemployment figures that understate the extent of the problem.
Only massive programmes are equal to the challenge of restoring stable growth to our economy. One such programme would be to establish a National Infrastructure Bank, advocated by prominent Democrat Felix Rohatyn, to which the government would assign the $65bn (£40bn, 45bn) annually allocated to support infrastructure construction nationally. The bank would have the capacity to borrow, with federal guarantees, an additional $200bn. This programme would ensure a rational rather than a political investment in infrastructure, and provide long-term infrastructure development on a major scale with a maximum multiplier effect on the economy.
A second programme would be a 100 per cent tax credit for increases in research and development by American businesses. In this way we could stimulate and incentivise the capacity for innovation and technical creativity and thus produce another Schumpeterian period of growth for America. There is no time to lose.
The writer is editor in chief of US News & World Report and chairman and co-founder of Boston Properties
RUSH: And, my friends, Obama, while the rest of you are starving and deciding whether to eat dog food or cat food, and wondering, "Where is my job coming from?" know that even Mort Zuckerman is out with a piece today, Mort Zuckerman the CEO and publisher of US News & World Report, basically saying that we're not going to have any new job creation. He's going on along with what the AP said the other day, that some industry jobs are not ever going to come back, that we're going through a transformation so 10% unemployment is the new norm. Meanwhile, Obama is out at $17,000 a plate, $33,000 a plate fundraisers.
How incredibly stupid is this when we had low unemployment year after year???
We don't have a free market at this point in our history, but I'm sure it would make jobs if we had one.
How many illegals did show up on the employment (and voting) rolls when working and on the unemployment rolls now?
Imagine the teeth gnashing Dowd, Olbermann, CNN, Gibson would be doing if this was Bush???
Of course, the Democrats are the authors of "It's the Economy, Stupid." Sure be a shame if that mantra came back to haunt them.
What liberals and leftists want us to believe is that our best days are behind us and that we have to settle for the chronically high unemployment that afflicts loser socialist countries in Europe and elsewhere. Meanwhile, the Chinese and Indians pass us and our standard of living and place in the world are headed for the toilet.
This is an updated version of Jimmy Carter’s malaise speech. Republicans ought to be condemning this from every forum they can find, on every t.v. show, in every speech and opinion piece. We ought to be saying we simply DO NOT ACCEPT second class status now or ever. We are number one and we intend to stay that way. Enough of this defeatist talk. Where’s a Reagan to lift the country up?
Baraqqis realize this game isn’t going well.
Time to move the goal posts.
Free market? Where the hell have you been, Mort, the Hamptons?
There is mountains of construction work to be done in this country. However the transaction costs between marginal worker and a construction worker is so high that the working class home owner can not afford it, and the construction worker would be better off bagging groceries.
And what are these transaction costs between the humble home owner and skilled laborer? Government taxes, permits, fees, mandated codes that neither the home owner wants or can afford, nor does the skilled tradesmen feel are warranted.
So the housing stock decays, and trades want for work, because you know if it comes down to between you, me, and the government. The government and its workers are going to make sure they survive, if not actually prosper and you and I can go to hell.
“The free market is not up to the job of creating work (Mort Zuckerman: Get Used to 10% Unemployment)”
Corrected title: “The democrat party in total power is not up to the job of creating work (Mort Zuckerman: Get Used to 10% Unemployment)”
Funny how the unemployment rate was 4% for 8 years under the Republicans.
Yes, but this is not about the truth: it's propaganda; it's the fight for the hearts and minds of Americans. And it works: many people on this conservative forum are angry at Goldman Sachs, bonuses, CEOs... All this anger has the same lack of foundation in reason or facts, but it HAS been enticed by people like Emmanuel ("Don't let a crisis go to waste") and Zuckermann.
I can't disagree. Say, has Mort ever had to survive on rations? Sure doesn't sound like it. I especially enjoy the part where his infinite wisdom lost $40 mil investing with Bernard Madoff.
Mortimer Benjamin "Mort" Zuckerman (born June 4, 1937, Montreal, Quebec, Canada) is a Canadian-born American magazine editor, publisher, and real estate billionaire. He is a naturalized citizen of the United States.
In 2008, Zuckerman was the 147th wealthiest American, and in 2007, he was the 188th as per Forbes. In 2006, he was ranked 382. The increase was related to the sale in 2007 of 5 Times Square and 280 Park Avenue in New York, which together realized US$2.5 billion for his company, Boston Properties, Inc..
He has been the publisher/owner of the New York Daily News since 1993 and, as of 2007, is the current Editor-in-Chief of U.S. News & World Report. He co-founded Boston Properties, Inc. in 1970. He is chairman of the board, and director.
Hong Kong’s unemployment rate is 5.3 percent. Singapore’s unemployment rate is 3.3 percent. Why don’t we study what they are doing?
I can tell you one thing they are NOT doing is making it hard to start businesses and hire people. John Stossel did a show where he went to start a business in Hong Kong. He was able to legally start selling merchandise within a morning. All he had to do was pay $25 for a business license, and he was good to go.
Imagine if we cut taxes and fired a lot of government employees whose job it is to bug businesses. The private sector could explode.
What’s this “free market” of which he speaks?
Isn’t 10% full employment in Europe?
We don't even have the rule of law in this country anymore.
When a small businessman can't be sure that his property won't be confiscated, that a retroactive tax won't be put into place, that the dollar won't be driven into the ground, how could any responsible business take the risk to hire someone.
The businessman has a responsibility to his family not to lose it all. He also wants to keep providing jobs for the employees he already has for his own and their benefit.
The same could be said for any investor. What investor would want to put his money into an American business when the fascists are in control. He'll put his money offshore or buy gold bars and bury it. That is capital taken out of our economy that could be working.
I don't blame them. In fact I am doing the very same thing.
The free market doesn’t create work when the GOVERNMENT disincentives it to do so. Suckerman is an azzhat.
We know how that turned out because the Japanese went on a spending binge for infrastructure. What did it get them over 200% nation debt to income ratio and a lost decade economically. At least they now have the world's longest suspension bridge and a nice airport built on an artificial island.