The Bureau of Labor Statistics reported last Friday that
The number of unemployed persons, at 14.0 million, was essentially unchanged in August, and the unemployment rate held at 9.1 percent.
Buried in the charts is the true number, the so-called U6 which shows that 16.2% or 25 million people can't find adequate work because they are now "discouraged", "marginally attached", or able to find only part-time work.
This is a huge waste of talent. The GDP output gap, or the amount of talent & capacity we are wasting is $900B per year, or $2.8T lost since the recession began.
The Bureau's report also indicates that the average wage of non-supervisory & production workers in private industry was $652.25 per week, or $34,000 per year. For the 25M unemployed, the wasted potential exceeds $34K each or $850B per year. (Interesting how close those two numbers are, huh?)
Fixing this unemployment-plagued recession is an opportunity of a lifetime. The rewards to our citizens and our economy are massive, affecting around 78.5 MILLION PEOPLE directly (the average family size in the US is 3.14, and it's not a leap to say that the whole family is directly affected if mom or dad can't find a job, or that mom & dad are directly affected if their daughter can't find a job). That's 1 of every 4 people in our country!!! In financial terms, it's an opportunity worth over $3 TRILLION over the next 3 years at least. $2.7 BILLION per DAY!!!
Most Keynesian economists like Nobel laureates Krugman & Stiglitz have advocated for temporary but massive investment through a government stimulus (over $1.2 Trillion over 2 years) to break us out of the liquidity trap that our economy is stuck in, since interest rates are already near 0% and can't help much more. They argue that the previous stimulus was too small by far, specially since a huge chunk of it was useless tax cuts and for sustaining existing jobs. Instead, something like FDR's bold attack on joblessness is needed to get everyone back to work. The analogy is of as an economic version of the military's overwhelming force doctrine. The nice thing is that once an effective stimulus kicks in, it generates momentum (the so-called multiplier effect) and allows the economy to hum along without requiring constant stimuli.
Other economists, particularly from the Chicago school, oppose stimulus & recommend that the government cut pretty much everything: taxes, spending, deficit, debt, staff, regulations...everything! They argue that Obama's previous stimulus failed and any other stimulus will also fail because government, and specially Democrats, can do no right.
The benefits of fixing the unemployment crisis are quite obvious to the unemployed. What's not often discussed is the benefit to the rich, who have focused on tax cuts. In recent years, the top 1% of households (i.e., Republicans) have taken home a quarter of the nation's income each year. It's quite likely that they would get a quarter of the income generated by getting all the unemployed & underemployed people back to work & boosting the GDP. That's an incremental $250B per year for just the top 1%, or over $240,000 for each of them over 3 years! Not huge by their standards, but still not bad, right?
Anyhow, let's see what the President proposes tonight and achieves in the coming weeks. Early reports indicate a proposed package of $300B, with half the amount set aside for tax cuts.