The long, deep unemployment hole

Marketplace Staff Mar 3, 2010

The long, deep unemployment hole

Marketplace Staff Mar 3, 2010


Kai Ryssdal: We got an early taste of the state of the labor market as of the end of February today. ADP, the company that does a whole lot of payroll paperwork for American companies, reported this morning that the economy only lost 20,000 jobs last month — better than expected. We’ll get the official Department of Labor figure Friday morning. But it’s a safe bet the unemployment rate isn’t going to be too far from either side of 10 percent. In this month’s Atlantic Magazine, Don Peck explores what happens when so many people are out of work for so long. Don, welcome to the program.

DON PECK: Good to be here, Kai.

RYSSDAL: Can you quantify for us how deep the employment hole that we’re in actually is.

PECK: It’s quite deep. It’s about 10 million jobs deep. In fact that’s the number that would be required to get us back to the 5 percent unemployment rate that we had before this recession began. That’s a huge hole. Even if you assume very robust growth, you still need about two years to get back to the level we had before the recession.

RYSSDAL: So given the fact that gross domestic product is growing in the past couple of quarters, the phrase “jobless recovery” then is apt.

PECK: It’s interesting in every recession since the early 1980s, it’s taken longer and longer to recover the jobs lost in that recession. So, yes, it’s been a jobless recovery so far, and I think there are some good reasons, peculiar to this recession, to think that it will be particularly long this time around.

RYSSDAL: Well, what might they be, then?

PECK: We had a decade-long housing bubble, and as a result, the housing sector and the financial sector became distorted. And I don’t think anyone expects either of those two sectors to return to their previous size anytime soon. So for that reason, you know there are lot of construction workers and financial professionals that even once demand returns, they’re not going to be able to simply return to work. They’re going to have to retrain and find new jobs.

RYSSDAL: And that really is the gist of your article, it’s what happens to people who are out of work for longer and the social effects that it has.

PECK: When people think 5 percent versus 10 percent unemployment, you know, it’s a big difference, but it doesn’t seem that big. What really makes it a huge deal is that most of that increase is in chronic unemployment.

RYSSDAL: For example, take a 55-year-old man who is out of work now for a year or more, what happens in his home life, what happens in his neighborhood, I mean break all that down.

PECK: We know from psychological studies that being without work involuntarily for six months or more is really about the worst thing that can happen to someone. It’s equivalent to the death of a spouse, and it is a kind of bereavement in its own right. And we also know that the happiness of husbands and wives and children are pretty closely related typically. So that 55-year-old man if he loses his job is likely to have some real mental health issues, and that’s likely to spread throughout the home. Marriages sour, divorce is common following a long bout of unemployment, and especially male unemployment, and also in communities where you have high rates of joblessness — and again especially male joblessness — you find the character of those communities tends to change over time.

RYSSDAL: Do we just, we men that is, do we just give up?

PECK: Well, we can’t do that, and in fact this is an era where hustle, and adaptability, and humility are, of course, necessary. But it’s an awfully tough time. I mean there are six unemployed people for every job opening in the U.S. right now. And over time, this has been called the mancession, but that’s really just an acceleration of a long-term trend. Men in their prime working age have their lowest participation in the labor market today since 1948.

RYSSDAL: Why has this recession had such lasting effect or what we anticipate will be lasting effect? Why is it so different than recessions in the last 10 to 15 years?

PECK: For two joint reasons, you know, this recession has been extremely deep in the job losses we’ve seen. I mean we did see an unemployment rate a little bit higher than what we have now in 1981. And it’s been so far of a long duration as well. I mean the ’80s recession was really a recession that was induced by the Fed to quell inflation. We could get out of it almost whenever we wanted to by the Fed reducing rates, and that in fact happened. This is a very different kind of recession. It’s just a situation that we as a country have not been in for a long, long time.

RYSSDAL: Don Peck. He’s a deputy managing editor at The Atlantic Monthly. His article in this month’s issue is called “How a New Jobless Era Will Transform America.” Don, thanks a lot.

PECK: Thank you, Kai.

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