In light of today’s terrible job numbers, it’s a bittersweet experience to re-read a recent report from Wells Fargo Bank which argues that high unemployment is “the new normal.” While it’s comforting to find Wells Fargo employees who aren’t laundering money for the Mexican drug cartels, their report is one more ideologically-driven nail in the coffin of America’s jobs agenda.
Ideology’s not a bad thing in politics, but it is a bad thing when it’s disguised as as a work of unbiased analysis. Despite their mild disclaimers, that’s exactly the posture Wells Fargo’s economists are adopting.
They may not even realize how biased and ideological their report is, and that’s the problem. Almost three years later, people are still hewing to the flawed philosophies that led to the financial crisis. That prevents the country from taking steps to end the permanent recession that enshrouds whole segments of our population.
Let’s be very clear about what these economists are selling: For decades, “full employment” meant that one out of twenty (5%) of working Americans was looking for work. As they found jobs, others became unemployed. Today the official unemployment rate is nearly twice that, 9.1%, and the unofficial rate is much higher. Many unemployed people are staying that way indefinitely, which means they’re plunged into a cycle of hopelessness. An entire generation of young people is beginning its work life in a state of prolonged unemployment, and the jobless rate for African Americans is twice that of whites.
That’s a national emergency. Yet, shockingly, almost nothing’s being done about it. The White House is diffident about proposing bold initiatives to address the problem. Republicans are adamantly opposed to helping the unemployed at all, because that might create new pressure to tax their wealthy clientele. The Federal Reserve’s efforts are enriching Wall Street but providing very little incentive for banks to lend and get the economy moving. WIthout relief, underwater homeowners aren’t buying goods and services and can’t move to find new jobs.
How can the country’s leadership justify their inaction? That’s where economists like the Wells Fargo team come in. Like the free-market actors they revere, they’re filling a demand – in this case, for certified experts who can justify inaction on technical-sounding grounds.
They claim that millions of Americans are unemployed, not because the economy needs more stimulus, but because they’re not the workers employers want. The jobs are out there, say these economists, but unemployed Americans aren’t right for them. As a result, the Wells Fargo team writes, “American workers will unfortunately have to get used to a higher ‘normal’ unemployment rate in the post-Great Recession era. By our calculations (that rate is) around 7.0 percent.”
That’s a popular opinion in some circles, because it lets a lot of powerful people off the hook. Even if they’re wrong, these economists’ continued employment is assured. (Talk about “moral hazard“!) And so, with a stroke of the pen, millions of Americans are dismissed from working life.
Predictably, conservative pop sociologist David Brooks argues that “more American men lack the emotional and professional skills they would need to contribute” in the workplace.” (I wish Brooks had elaborated on those missing “emotional” skills. Are these men insufficiently submissive? Getting the wrong results on their Myers-Briggs tests? Are American men from Mars while employers are from Venus? Maybe there’s a new book in the offing.)
Remarkably, Brooks somehow managed to discuss American unemployment without ever mentioning the recession. To be fair, he does wander from the “structural unemployment” reservation by observing that the nation should spend some money to address this problem. The argument’s real value is that it can be used to argue that we can’t spend money to fix it. We can only accept the fact that higher unemployment’s here to stay.
To accept the “structural unemployment” argument, you have to believe that our economy radically changed in 2008. It’s true that housing construction fell dramatically, costing up to two million jobs. But there are at least 25 million un- or under-employed. The reality is that 70% of our economic activity comes from consumer spending, and the “structural” argument suggests that our entire economy was driven by the now-burst housing bubble.
But we had much lower unemployment before the bubble than we do now. While NAFTA devastated large parts of the manufacturing job market, that doesn’t come close to explaining today’s numbers or suggest there’s a “new normal.” And it doesn’t explain the high rates of unemployment among African Americans or young people.
The “structural” crowd offers very few prescriptions, and those they do offer don’t make sense. More education? College graduates are educated, and they can’t find jobs. Lower wages? Young people and minorities will accept lower wages, and they’re still unemployed. Tax breaks for big business? They’re already sitting on $2 trillion in cash, but they won’t hire without consumers to buy their products.
Here’s the reality: Thanks to Wall Street’s mischief consumers are mired in debt and states are laying off workers. The economy only added 54,000 jobs last month, and we’d need to add between 350,000 and 400,000 jobs a month for three years if we wanted to achieve 6% unemployment. That requires government investment, which is opposed by both the ideologues and the undertaxed wealthy.
The “structural unemployment” crowd argues that the workforce needs different workers. Apparently those workers need to be white people. And they better be over thirty (but under fifty). They can’t live in certain Rust Belt areas, either (but then, they can’t move in this housing market.) What these economists are really suggesting is that we discard entire groups of Americans, millions at a time, to avoid inconveniencing a certain clientele.
That may not be their objective. They may just be reflecting the biases of their peers, a group that clung to its worldview even after the events of 2008 discredited it. (In an entertaining essay, at least for econo-nerds, Mike Konczal observed that his graduate macroeconomics course was “the most ideologically indoctrinating class I’ve ever seen. By a mile.”)
The new emphasis on “structural employment” is the latest intellectual trend among economists who have proven surprisingly responsive to the self-interest of the moneyed class. We know that at least one group of workers has adapted to meet the economy’s new “structural” needs, thereby ensuring its own continued employment.
That group is Wall Street economists.