Yesterday’s unemployment report offered some encouraging signals, and some discouraging signals. It was nice the headline rate dropped. But, it was sad that there is a continued exodus of productive labor from the labor force. People are frustrated and can’t find a job.
Erik Hurst hit the nail on the head last week. Austan Goolsbee made a similar point. In previous recessions, the economy would bottom and then have a very strong comeback. So if we dropped by 3%, we’d pop by 6% or more. When the economy popped, old jobs that disappeared would reappear. If you were an out of work carpenter in the recession, you’d find a way to be an employed carpenter in the growth out of the downturn.
In this deep recession, unskilled labor jobs disappeared as usual. But in the recovery, they aren’t coming back.
The jobs didn’t magically go to China or India because of lower wages. If anything the change in exchange rates and the earthquake in Japan caused manufacturing companies to rethink their supply chains. They are implying different costs and some companies are even bringing some manufacturing back to the US. They can’t risk supply chain disruptions caused by natural disaster.
The glut of housing persists, and that is where a lot of the unskilled labor made a sustainable living. America still has a lot of supply to work through before housing demand will begin to increase again, so those jobs won’t get created for awhile. That frustrates the unskilled worker and they make the decision to collect benefits and sit at home. Much of the government support program mimics the old “job banks” that unions used to fleece General Motors.
Meanwhile, some people are acting on their frustrations and blaming the wrong people for their trouble. Instead of doing something about their problem, they wait for the government to act, or try to get someone to do something for them.