Six Years of High Unemployment? Are you @&*#in' Kiddin' Me?

Folks, the most horrific prediction was given by the Federal Reserve. Six, count 'em, six years of high unemployment. From the Federal Open Market Committee:

Somewhat more than half of the participants judged that, in the absence of any additional shocks to the economy, the economy would converge fully to its longer-run rates of output growth, unemployment, and inflation within about five or six years; the rest indicated that it could take longer for unemployment to fall back to its longer-run rate or for inflation to rise back to the level they deemed desirable in the longer run.

It's not what the Fed is saying is inaccurate, it's more to our government, and it's refusal to get off of it's corrupt and special interests agenda and do something.

Imagine how many skills will atrophy, how many people will never financially recover with these kind of projections.

Below are the Fed's consensus for new GDP, unemployment and core inflation revisions. As we can see, they were lowered and the FOMC minutes are loaded with pessimism. The only good news is how often the Federal Reserve gets it wrong in economic forecasts. Unfortunately, this time, they probably are right on the money.

 

FOMCproj 11/10

 

Even worse, the Fed believes unemployment could increase:

Participants agreed that progress in reducing unemployment was disappointing; indeed, several noted that the recent rate of output growth, if continued, would more likely be associated with an increase than a decrease in the unemployment rate.

So, what the hell is the problem? Why, beyond giving the banksters carte blanche, offshore outsourcing our jobs, committing labor arbitrage at every turn, selling people over-inflated houses that they now take away....what is the reason employers won't get off of their asses and hire some people?

Bloomberg quotes productivity gains as the cause, completely ignoring the fact offshore outsourcing business is booming, China imports are soaring and corporations are investing overseas. Others try to claim there is a skills mismatch, that somehow, magically the United States workforce is less than what it is, instead of acknowledging the great worker squeeze.

It is true that corporate profits have come from cost cutting, but this has been happening since 2000, when corporations started in mass treating U.S. workers as disposable commodities and offshore outsourcing anything that wasn't nailed down. It's more a continuation of the same ole thing, only the same ole thing was temporarily masked by a housing bubble. From the Federal Reserve meeting minutes:

With respect to business spending, contacts generally reported that they were investing to reduce costs but were refraining from adding workers or expanding capacity in the United States. Energy producers were an exception.

But what is the real problem? In a word, growth. That's highly targeted U.S. domestic growth. The economy isn't growing enough to generate jobs.

There is a way to increase economic growth and that is by reducing the trade deficit. Anyone reading GDP reports can see imports wipes out GDP. Even the Federal Reserve mentioned the excessive imports:

But construction activity in both the residential and nonresidential sectors remained depressed, and a significant portion of the rise in domestic demand was again met by imports.

Since the housing bubble popped, resulting in a greater than 20% unemployment rate in construction, there probably is a little structural unemployment. That said, there are a host of highly skilled individuals who need a job right this minute, else those skills will atrophy and be lost. On this score one can blame globalization, offshore outsourcing and labor arbitrage. U.S. workers sit idle, while their jobs are moved offshore and nowadays, created offshore instead of in the United States.

Bottom line the United States need a major economic shot in the arm and unfortunately that shot is under the control of the government, the executive branch and Congress versus the Federal Reserve. While the Federal Reserve secretly met to even consider unlimited quantitative easing, the bottom line is trade, taxes and Stimulus as well as modifications in corporate and labor law, is under the purview of Congress.

Waiting for Americans to become homeless, fall of of the labor participation count is not the answer to these long term unemployment problems and yet that seems to be the only real strategy identified.

Meta: 

Comments

"We are nothing to them"

Great post! How about 10 years of no net new jobs in the private sector? We have loads of talent graduating from fine colleges and universities, ready and anxious to work. There strategies - wait for a job to open up. That means someone retires or passes away. No net new job expansion since Bush II. We're worse than disposable to the unimaginative and greedy ones. We're not even worth thinking about.

You must have Javascript enabled to use this form.

offshore outsourcing/insourcing

NCGs (new college grads) should be looking at offshore outsourcing, insourcing instead. It's not "old people" and waiting for a "position to open up", it's the BPO industry is booming in a lot of areas which were the entry professional positions, including legal, that instead of hiring NCGs corporations are offshore outsourcing the job or bringing in cheap labor on guest worker Visas.

Also, as manufacturing goes, there are a host of professional careers that go along with it. So, while people believe they are just offshore outsourcing "manufacturing jobs", manufacturing spawns a host of professional jobs.

It used to be the oldies mentored the newbies, now it's more the oldies training the cheap labor, often on guest worker Visas or offshore outsourced.

It's an astounding knowledge transfer outside of the U.S., just completely ignored too because that transfer happens with people, instead of a physical plant or piece of machinery.

You must have Javascript enabled to use this form.

tens of thousands of new jobs needed each month to break even

With the United States population increasing by one new person every 12 SECONDS it needs around 100,000 JOBS each month just support the increased number of working age population (this assumes that only 50% of the increased population is working age).

So even if the U.S. has no job losses for an entire year there will be higher unemployment because the number of people entering the work force is greater than the number leaving.

You must have Javascript enabled to use this form.

Agreed on all points....

It's very obvious that our trade policies are a huge problem and Obama just signed another trade pact with South Korea. A country which is even more protectionist than China and Japan combined.

Obama will be a one-term president, but don't anyone ever think by bringing in a republican it will fix anything. Republicans are far worse than any Democrat.

GDP estimates are wrong because real growth must be separated from inflation and Gubment stats ignore a lot of factors, like food and energy for instance. Also, it uses subjective means to come to conclude what the CPI is.

Like how many indexes would anyone invest in if it weren't objectively defined?

You must have Javascript enabled to use this form.