Unemployment 12/08/09
Last Friday we got word that the employment picture in the U.S. improved substantially over the month of November. According to the Labor Department, the nation shed 11,000 jobs, a mere fraction of the 130,000 economists were expecting.
The news came as a shock to many. In fact, president Obama reportedly corrected his chief economic adviser when she first told him the news, saying "You mean a one hundred and eleven thousand job loss?" And make no mistake, despite my general contrarian viewpoint — I'm as happy to hear the better-than-expected news.
But in my mind, there are deeper issues at hand when it comes to the employment picture.

Let's Begin with the Way Washington Measures Employment in the First Place Along with the 11,000-new-jobs-lost number, we also learned that the nation's unemployment rate dipped to 10 percent from last month's result of 10.2 percent. That's another encouraging sign, though it still represents a situation as bad as we've seen in decades.

What's more disconcerting to me is the fact that this official measure of unemployment is dubious in the first place.

Consider some of the people that it does not include:
• Anyone who is "discouraged" — i.e. they have basically given up on looking for work
• Anyone who has taken a part-time job even if they were formerly a full-time employee (known as "the marginally attached")
• And the legions of folks who are now "underemployed," meaning they are working jobs that pay far less than before — engineers driving cabs, for example -
Thus, we should be asking two important questions:

First, what is the nation's real unemployment rate? Interestingly enough, the Bureau of Labor Statistics also keeps what it calls "alternative measures of labor underutilization."

No, you won't hear this touted in a government press release.

The U-6 number, which includes marginally attached workers, workers with part-time jobs because of economic reasons, and other categories, shows the current jobless rate is 17.2 percent. And realize that there's really no way to include people who have taken major pay-cuts or other under-the-radar losses.

Secondly, will those underemployed folks ever find jobs comparable to what they once had? Obviously the answer is "some will, but other broad categories will not."
Consider all the Johnny-come-lately realtors, mortgage brokers, and contractors who were riding the housing bubble for all its worth. And consider other workers — like factory hands who were benefiting from over-the-top overtime payouts and other unsustainable trends.

Take a look this excerpt from a recent Wall Street Journal story on the underemployed. It makes my point:

"Mr. Crane had been earning more than $100,000 a year operating heavy machinery at Delco, a former unit of General Motors ... but when he lost his job he was thrust into a netherworld of part-time gigs: working the registers at Taco Bell, organizing orders at McDonald's, whatever he could find."

Now, don't get me wrong. I feel bad for Mr. Crane. But am I the only one who finds six-figure salaries on factory floors a little shocking? I know many entrepreneurs and professionals who make the same amount – or LESS! Sure, when factories were running full-tilt, even folks at chicken processing plants were raking in $70,000 a year or more. But those days are long gone.

I'm just saying that facts are facts.

Yet plenty of people have now become so used to the really good times — or are so far in debt — that they aren't willing or able to accept even merely good times.
The fact that people like this continue to collect unemployment — and even have their benefits extended — while millions of others are genuinely struggling and going uncounted demonstrates just how unfathomable this country's jobs situation is right now.

More importantly, all of these issues raise serious questions about the sustainability and rate of the economic recovery, especially with so much of GDP tied to consumer spending and so many consumers still struggling with credit hangovers from the days of excess.

So I don't care what the latest job number says. The recession seems to be abating, but many structural problems remain. And some of them are in our collective psyche.We must remember that an official unemployment rate of 10 percent is hardly something to celebrate.

Even as the overall picture improves, our economy will continue to wrestle with a protracted decline in available jobs and salaries as well as a massive credit hangover.

Omar P. Bounds III A.A.R.E., C.E.S., G.P.P.A
The Bounds Auction Company