Monday, August 3, 2009

Will We Have Structural Unemployment

From Reuters:

From auto workers in Detroit too old for retraining, to Hispanic migrants in Arizona with no homes to build, to new college graduates competing with experienced workers for scarce jobs, more and more people are facing long-lasting unemployment.

Since the recession began in December 2007, the jobless rate has climbed 4.6 percentage points to 9.5 percent, the biggest jump since the Great Depression. Worse, the mean duration of unemployment is now almost 6 months, the highest on record.


In the current recession, economists say high unemployment is likely to persist at least another four years. In Michigan, home to the battered U.S. auto industry, nearly 13 percent of jobs may be wiped out, according to research firm IHS Global Insight, and the state's labor market probably won't return to its pre-recession strength until after 2015.


Retraining is the usual prescription, but pay and benefits in new careers are often far worse. Ex-auto workers who once made $28 an hour can now expect more like $9.

"The hardest thing for many auto workers who've been doing the same job for 25 years or so to accept is that instantly, permanently, their standard of living has been ratcheted down 80 percent," said Douglas Stites, chief executive of Capital Area Michigan Works, a career center in Lansing, Michigan.

The housing crisis has worsened the situation for job seekers because areas with high unemployment also have high foreclosure rates, making it hard to sell up and move on.

This is going to be the primary issue coming out of the recession and there is no easy fix. The auto industry went through bankruptcy to shed its problems. As a result, they cut a lot of workers who won't be coming back. In addition, there probably aren't any jobs requiring a similar skill set. Also note the massive amount of construction workers that are now unemployed. Housing is not going to come back in such a degree that all of these people will be able to find jobs.

The only way to cure this problem that I can think of is to find the next big thing. What made the 1990s so beneficial for everyone was there was a new technology that created a ton of good paying jobs which were attractive. That's what we ultimately need here -- the next big thing. The question is will we find it soon enough?