The ‘Dark Underside’ of Obama’s Economy

Mad MagUnderemployed Are Still Job Market’s ‘Dark Underside’



 Mike McCarty has watched people job-search for 25 years. McCarty, now volunteer executive director of Ballwin, Mo.-based Businesspersons Between Jobs, first came to BBJ as a job-seeker himself.

During the worst of the recent recession, BBJ hosted 80-120 job-seekers a week. Now that’s down to about 20, McCarty said.

poverty 2“Part of it is people getting more jobs, part of it is people working what I call ‘beneath their station,'” he said. “That seems to be a dark underside of the economy, where the numbers don’t tell the whole story. … People aren’t making the money they used to and aren’t as happy as they used to be.”

By many measures, the job market is booming like the dot-com era. Employers have added an average of 241,000 jobs per month in 2014, the best since 1999. The jobless rate has fallen nearly a full percentage point in the last year.

But McCarty isn’t the only one wondering whether the brighter economy has a “dark underside.”

There is room for further improvement,” Federal Reserve Chairwoman Janet Yellen said Dec. 17, “with too many people who want jobs being unable to find them, too many who are working part time but would prefer full-time work, and too many who have given up searching for a job but would likely do so if the labor market were stronger.”

Many Fed policymakers cite these “underemployed” to explain why they think the U.S. still needs monetary policy support.

There were 4.8 million job openings in October, the latest data available from the Labor Department. That’s the second-highest level since January 2001.

Structural Problem?

But 2.8 million people, known as the long-term unemployed, have been out of work longer than 27 weeks. Nearly 7 million are working part-time jobs involuntarily. Another 700,000 are “discouraged,” meaning that they hadn’t bothered to search for work in the last four weeks. And labor force participation remains at long-time lows while ‘disability’ rolls have exploded.

“We’ve had 57 straight months of positive growth,” said Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers University. But “we still have major problems.”

At some point the situation may become structural, and economic growth alone won’t help. For example, the longer the long-term unemployed are out of work and their skills atrophy, the harder it will be for them to return, Van Horn said.

If the underemployed do re-enter the workforce, many economists fear their inability to command the same salaries as those who’ve worked without interruption may push all wages down.

“They’re going to have less money and lower mobility,” Van Horn said. “That means the overall economy is not as large because there are less people in the workforce.

“We’ve got to get the labor force participation rate up,” he added. “I think we should be moving in that direction both for the individuals and for the whole society.”

 Trends Finally Improving?

 Some experts are optimistic. “We’re in the seventh inning of an expansion,” said John Challenger, CEO of placement firm Challenger, Gray & Christmas. “This is where those people who have the hardest time finding jobs get a chance. Companies need people to do the work, the most-skilled, highest performers are taken, so they take chances.”

He points out that long-term unemployment has fallen by 1.2 million in the last 12 months and thinks job gains will only accelerate. And, he adds, anyone counted as “long-term unemployed” is at least looking for work.

Yet Challenger notes that more jobs were lost in the Great Recession than were created from June 2003 to January 2008. He advocates tax breaks for companies that offer targeted worker training and development. Bigger tax breaks might be offered for firms that hire the underemployed.

Van Horn thinks changes may have to come from firms and workers. Many employers have lots of reasons to hire only part-time workers, he pointed out, such as a lean payroll and avoiding ObamaCare penalties.

They must weigh that against negatives such as higher turnover, but would-be workers have their own incentives, Van Horn added.

McCarty is thinking a lot about those working “beneath their station.” They may take a job that’s not ideal, only to find it’s too hard to continue job-searching, he said. He also thinks the job market is becoming even more driven by “who you know,” a reality that favors the already — or at least recently — employed.

“I feel pretty hopeful about the whole thing but the nature of the job search has changed,” he said.


“By justice a king builds up the land, but he who taxes heavily tears it down.” (Proverbs 29: 4)

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