There’s a persistent myth among ultra-conservatives which tells us that “there are plenty of jobs — it’s just that Americans are too lazy” to fill them. The mythology is part individualism, part financialist cant, with generous portions of elitism and racism mixed into the recipe. 1%’ers in Chicago papered Occupy protesters with photocopied applications for work at the fast food corporation McDonalds. 1%’ers held up “Get A Job Signs” in New York. They obviously didn’t get the message that about 83% of the Occupy Wall Street protesters are employed. This situation didn’t happen overnight. First, the unemployed needed to be inserted into a comprehensible category supportive of conservative principles.
We can reach back to the myth of the Welfare Queen for a modern nascence of this bit of ideological rhetoric, which often conflates unemployment benefits with public welfare. That the Reaganesque myth has long since been debunked doesn’t matter. [AnitraNet] [Maran.com] [NewStatesman] [Zucchino/Amazon.com] The image is settled in conservative minds — the unemployed must be conniving, possibly addicted, tempted to fraud, and for the most part members of minority ethnic groups. That unemployment benefits are earned by those who have previously been employed, coming from the proceeds of contributions into the unemployment insurance programs by workers and employers, doesn’t crack the mold either. Those who have adopted this narrow mindset aren’t going to be much affected by statistics demonstrating the groundless nature of their premise. It’s enough for them to have seen or to have known a single individual who, at least superficially, fits into their categorizations.
Once the unemployed and economically disadvantaged are firmly inserted into a mythological scheme in which they are entirely responsible for their own situations — from inconvenience to misery — they can be summarily dismissed as people who want “Something For Nothing. The problem, of course, is that the categorization only serves to reinforce ideology and doesn’t approach or describe economic realities.
Welcome To The Real World
In the real world entirely too much work is temporary: Table A-11 employment statistics from the Department of Labor, “Unemployed persons by reason for unemployment,” tells us that as of October, 2011 some 1,409,000 people in the United States were unemployed because they had completed temporary jobs. Of the 8,006,000 who had lost jobs or had completed temporary ones, 9% were on temporary layoffs while 49.2% had been permanently laid off. More concerning, temporary, as opposed to permanent, employment is trending upward.
“Temporary jobs, both professional and blue-collar, are being added at a fast clip in an otherwise sluggish economic recovery, according to data and labor experts.
Growth in temp jobs is a good sign the economic recovery is taking hold, say experts, but it also raises concerns that temp employment could have a more permanent place in tomorrow’s workforce.” [USAT, Jan 2011]
Facing uncertain demand for goods and services some companies are now much more comfortable with temporary, or contingent, hiring. The obvious problem is that temporary employment generally means lower pay, fewer benefits, and lowered overall earnings expectations. None of these factors are conducive to improved demand for American goods and services.
If we are willing to settle for an economy resting on the efforts of temporary workers, then we must also be willing to assume that their lowered income expectations will inform their decisions about home ownership, vehicle purchases, and discretionary spending for non-essential items.
If we adopt the Financialist perspective that lowered labor expenses are always positive because they improve the earnings expectations for the corporation, then we have to dismiss the significance of the lowered income expectations of the labor force. However, this gives the corporations yet another problem — lowered income expectations in the work force means less demand for the goods and services offered by the corporations.
In the real world not all unemployment is equal: For example, Table A-4 from the Department of Labor informs us that the unemployment rate for those who have attained a Bachelor’s degree, or higher, is an economically comfortable 4.4%, while the unemployment rate for those who have only a high school diploma is 9.6%. These numbers should support the proposition that at least some post-secondary education or training is necessary for our 21st century labor force. Indeed, the unemployment rate (8.3%) for those with Associates degrees or similar educational attainment is 1.3% lower than the rate for those without any specialized or advanced education.
The statistics from Table A-14 (Department of Labor) reinforce the point that some economic sectors are more prone to higher levels of unemployment than others. As of October, 2011, the highest unemployment rate was predictably in the construction sector, at 13.7%. Agricultural workers had an overall 13.4% unemployment rate, and those working in leisure and hospitality — right in Nevada’s economic midsection — were experiencing 10.8% unemployment. By contrast, those in the financial sector saw an unemployment rate of 5.8%.
In short, what we have is a recovery in the financial district while construction has plummeted downward, and other professional and business services were looking at 10.1% unemployment rates as of last month, and durable goods manufacturing was experiencing an overall 8.0% rate. This conclusion shouldn’t be news to anyone. However, the point should be made that when the bottom is shaved off the economy the top can’t continue to float. The CEO of the New York Federal Reserve seems to have grasp this notion:
“One significant problem is the trajectory of home prices. Homeowners have lost more than $6,000 billion in home equity since the housing market turned. For homeowners with mortgage debt, about one-quarter of these homeowners have mortgage debt that exceeds the value of their homes. The loss of home equity is a serious problem in itself of course, but it has been exacerbated by the fact that many households have found it very difficult to refinance to take advantage of lower mortgage rates.
Without a substantial improvement in the ability to refinance, the outlook for real estate prices, and in income prospects, it seems likely that many of the households that ended up with too much debt after house prices fell 30 percent from their peak may need to deleverage further.
This implies that for the household balance to fall and provide an impetus to growth, those households with low debts will have to spend more of their income. In many ways these households are in a similar situation to large corporations: their balance sheets contain substantial liquid assets. They are undertaking precautionary saving as a response to greater uncertainty about the economic outlook and their long-term prospects.” (emphasis added)
Translation: Middle class Americans, whose wealth tends to be tied up in their homes, took a $6000 billion shellacking in the wake of the housing bubble explosion, and are still trying to climb out from under the economic debris. When the NY-FED CEO says, “undertaking precautionary savings,” he means people whose home equity has been wiped out and who are looking at employment insecurity aren’t going to start spending money again until they feel more comfortable about their situation.
It needs to be said yet again: Employers will not hire more staff unless it is evident that current staffing levels are inadequate to satisfy orders or to provide an acceptable level of customer service. Whether those jobs are permanent or temporary doesn’t matter in this context, there will be NO jobs unless there is an increase in the demand for goods and services.
So, why aren’t the 1% supporters on Wall Street seeing the entire picture?
Tunnel Vision in Hermetically Sealed Environments
An article in Reuters yesterday described a significant portion of the tunnel vision problem on Wall Street. The occupants inside the financial district buildings see the world very differently than the occupiers outside the buildings. We can summarize parts of the disconnect:
(A) The Horatio Alger Syndrome. The Reuters article explains — “(John) Paulson responded (to Occupy Wall Street) by putting out a press release that described his $28 billion, 120-person fund as an exemplar of the American Dream: “Instead of vilifying our most successful businesses, we should be supporting them and encouraging them to remain in New York City.” To which someone might have issued a press release in response with a popular quotation from the poet Robert Burns: “O would some power the giftie gie us to see ourselves as others see us.”
Paulson’s hedge fund may be small in terms of the number of employees he has hired to staff it, but for a $28 billion fund? Most small business owners may take home income in a range from about $31,246 to $233,600 depending on how the reported income is characterized and whose income is included. Paulson’s attitude also illustrates the next part of the disconnect.
(B) The No Mud On Me Syndrome. According to the Reuters article:
“In conversations with nearly two dozen current and former bankers, finance professionals and money managers across the United States, the prevailing sentiment is that the anger at Wall Street’s elite is misguided and misdirected. Blame the politicians and policymakers in Washington, many of them say, for encouraging people to buy homes they couldn’t afford and doing nothing to stop or discourage U.S. consumers from piling on more than $10 trillion in household debt.”
But wait? Who was pitching those home equity loans? Who was financing the NINJA mortgages? Who transformed the interest-only financing formerly made available only to developers into “creative” financing for individual homeowners? Who devised the ARM’s? And – who bundled these very risky loans into packages, stuffed them in off shore accounts to be hacked and stacked into CDO’s, and then who bet on the prospects? The atmosphere around the trading desks must have been so fogged during the Housing Bubble that traders couldn’t (or wouldn’t) see that the investment banks’ insatiable appetite for more loans to cram into the CDO Craw was creating precisely the “un-valuable” risk the institutions were hoping to spread. It isn’t like they weren’t warned. [Forbes] [CNBC] [McClatchy]
(C) Tunnel Vision Syndrome. Or, What You Don’t See Won’t Hurt You:
“Former Wall Street practitioners say the Street does not lend itself to a lot of introspection. “The world of investment bankers and especially the trading floor region is notoriously hermetically sealed,’” says Kenneth Froewiss, a retired JPMorgan Chase investment banker and former finance professor at New York University’s Stern School of Business. “The walls may be filled with screens beaming the latest news, but there is typically an obliviousness as to what is happening across the street.” [Reuters]
It also doesn’t help when one is isolated in a building securely sealed away from the hoi-polloi, and can escape to the Hamptons or other enclaves of affluence, behind gated and secure perimeters. There is another facet of this sealed-off existence we might also explore.
(D) The Ascent of the Trading Desk Syndrome. The Reuters article touches on this aspect of the situation, but we can speculate that there is more to the problem — such as the attitude on full display during Senate hearings on Goldman Sachs and the Hudson deals. “We’re just making markets,” the traders explained. That one side was “ripping the face” off the other wasn’t incorporated into the thinking. The testimony lead to one of the more ironic portions of the proceedings when former Senator John Ensign (R-NV) asked, “Do you have a corporate statement of ethics.”
There was “nothing wrong” with the bologna like financial substances created by the traders just as long as there was someone willing to buy the toxic Stuff. The Reuters article explains the bankers’ belief that they are not in the business to be customer friendly — it didn’t go as far as Liar’s Poker, or Where Are The Customer’s Yachts?’ Nor, did it take us into the realm of Predator’s Ball. When the trading desks become the income source for the bank, their priorities become the institutions priorities –and sadly, their ethic subsumes the institutional ethic.
The occupants of the financial district buildings probably don’t know that there are variations in the unemployment levels discernible in education levels; or that altogether too much work is now contingent or temporary employment; or even that the Welfare Queen Mythology which underpins their disparagement of the unemployed is fictional.
They can’t see beyond the trading floor or past the security perimeter in order to observe the consequences of their actions. Evidently, the only consequences they can see are the immediate results of their trading efforts. That the dollar signs in their books translated to a $6000 billion loss for homeowners is not part of their consciousness — if the homeowners lost wealth that must be “their own fault,” surely it cannot be the result of hard working traders who made billions for their companies. After all, the only thing they are paid to see are the $$$ in their books.
To adopt this mindset as the foundation for American economic recovery is to blind ourselves to the reality that the financial markets are only one part of the total economy. However important the Financialists believe themselves to be, they are not disconnected from the work force, the truly small business owners in the retail or construction sectors, and the unemployed who are seeking work while there are 4 workers for every job opening.
They are not disconnected from that other side of the classic economic equation that posits DEMAND must be there before any employer can hire another contractor, another tool and die machine operator, another nurse, another accountant, or another landscaper. Until they do see the connectivity they must be relegated to the Financialist Class, calling them Capitalists would be a misnomer.