Lower Unemployment, But More Unemployed

On Friday, the Bureau of Labor Statistics reported that the nation’s unemployment dropped in August from 7.4 to 7.3 percent.

Good news, right?

Wrong. The reason for the lower unemployment number was due to fewer people looking for work and dropping out of the workforce. The BLS computes unemployment as the percentage of workers who are looking for jobs but can’t find one. According to the bureau, the labor participation rate, the percentage of Americans who consider themselves as part of the workforce — either working or looking for work — is at its lowest level since 1978. While the unemployment rate ticked down one-tenth of one percent, with an increase of 169,000 new jobs, the number of those in the workforce shrunk by 312,000. That means fewer Americans were actually working in August than in July.

The number of those who are working part time but would prefer full-time employment nudged slightly down last month, but at 8 million it’s a much larger number than one would see in a healthy recovery. Little wonder there are so many part-timers. With Obamacare forcing employers to pay for health care for full-time employees, companies are balking at picking up the tab and instead are hiring part-timers. Small businesses are also careful not to hire more than 50 employees, the number at which mandatory health-care coverage kicks in.

The part-time trend is not only sweeping across small businesses. Part-timers account for more than 100,000 of Walmart’s 1.3 million workers. Prior to 2013, part-timers were never more than 2 percent of Walmart’s workforce. America is in the midst of an unprecedented part-time hiring binge, which means many workers who are getting jobs are seeing smaller paychecks and can’t make ends meet.

But Obamacare certainly isn’t the only culprit in creating this grim job picture. The current recovery has been paradoxical. Corporations are recording fat profits and the stock market is booming, but all that prosperity lies in the shadow of anemic GDP growth. While other recoveries have seen average GDP growth of 5 percent, this current recovery has averaged only 2 percent.

But even with a pathetic GDP growth rate, why are companies sitting on their fat corporate profits and not investing and not hiring? It’s somewhat of an economic chicken and egg problem: companies are not hiring because they are fearful of low demand for their goods and services, a demand they feel is low because of high unemployment. If people don’t have jobs they can’t buy, and if they aren’t buying companies won’t hire.

How to break this deadlock? Previously, in trying to boost the economy, the government has tried to put more spending money in the hands of current workers, either through tax breaks or credits. Kennedy did it; as did Reagan and Bush. However, the opposite was done during the past year: the payroll tax cut was repealed, suctioning out $115 billion in consumer spending money from the economy.

It’s true that the Stimulus Plan aimed to create more jobs and more demand, but too much of the money was spent on short-lived projects or pie-in-the-sky green energy initiatives that didn’t create sustainable jobs. Many of the solar projects (such as the now infamous Solyndra) subsidized by the government went bust, wasting billions in taxpayer money. A true stimulus plan would create projects that would encourage more investment in the U.S.: improved mass transportation, upgraded power grids and communication networks. Such projects create both short-term and long-term jobs.

Although on the one hand companies are reluctant to hire, on the other they are screaming for more highly-skilled workers, complaining that they can’t find enough of them. Instead of hiring here, many high-tech corporations are turning to overseas talent in India, China and even Eastern Europe. IBM has more employees overseas than it does in the U.S. Apple assembles its heralded iPhones in China.

The bleeding of skilled jobs to offshore locations must stop, but it will only end if there’s a huge commitment to an educational system that furnishes the skills that corporations need to stay competitive. There have to be greater tax incentives for American corporations to recruit from U.S. universities. But at the same time, our schools have to teach the computer-science skills that companies are seeking. While high-tech jobs are predicted to be the fastest growing sector of the economy during the next decade, our educational system is unprepared to meet the demand. Only 10 percent of American high schools offer programming courses.

This recovery has been spinning its wheels for the last five years, going mostly nowhere in terms of jobs and higher income. Unless our country strikes out in bold new directions, it’s likely that more Americans will give up hope of ever finding a good job again.

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