Pain of job crisis goes well beyond the unemployed
The pain isn't confined to the 14 million officially unemployed Americans. Among those hurt by today's 9.1 percent jobless rate are people forced to work only part-time and those who've given up looking for work in frustration.
Count many people with jobs, too. Their pay, home values and employment prospects have been diminished by the lack of good-paying, full-time work. Include, too, communities where services have been slashed, small businesses struggling with weak sales and young adults who can't find jobs to repay student loans.
The ailing job market is both a symptom and a cause of troubles elsewhere in the economy — from a depressed housing market to cash-short governments to sluggish consumer spending.
Here's a look at the wide-ranging consequences of chronically weak job growth.
A crippled labor market shifts bargaining power to employers. Workers have little leverage to seek raises. When adjusted for inflation, pay was nearly 2 percent less in August than it was a year earlier, according to the Labor Department.
"People are much more compliant and willing to take extra work assignments because they're afraid," says Carl Van Horn of Rutgers University's Center for Workforce Development.
High unemployment squeezes government finances in at least two ways. Lost jobs mean governments collect less tax revenue. And they have to spend more on unemployment benefits, food stamps and other social programs.
The federal government's tax collections this year are expected to fall to the lowest level since 1950 as a percentage of the economy. More than 40 million Americans — a record 1 in 8 — are receiving food stamps.
Enrollment in Social Security's disability program has shot up by more than 1 million people, or nearly 16 percent, since the recession struck in 2007. In part, that's because those who can't find work are seeking government benefits instead.
If the economy were strong enough to reduce unemployment to a healthy 5.2 percent, next year's federal budget deficit would be one-third lower than forecast, the Congressional Budget Office said this week.
Worst off are local governments. They've been cutting services and jobs for the past two years. Over the past 12 months, localities have slashed 210,000 jobs.
Breaking into the job market is increasingly hard for high school and college graduates. Businesses aren't creating many jobs. And workers who have jobs are holding on to them. That leaves young people with few openings to apply for.
To find work, new college graduates have to settle for lower pay and jobs that don't require a bachelor's degree. That's painful for those who took on big debts to pay for their college education.
"Young people who enter the labor market under these conditions pay a wage penalty for quite a long time," says Harry Holzer, former chief economist at the Labor Department.
College grads hired in 2009 and 2010 earned 10 percent less than those who found jobs in 2006 and 2007, before the Great Recession, the Rutgers researchers found.
And economist Lisa Kahn of Yale University found that young people who graduate in a poor economy will still be saddled with lower wages 15 years later.
THE UNDEREMPLOYED AND THE HOPELESS:
In September, nearly 9.3 million Americans had to settle for part-time work even though they wanted full-time jobs. That was up 440,000 from August. An additional 2.5 million want to work but have given up looking. Add those part-timers to the workforce dropouts and the unemployed and nearly 26 million, or 16.5 percent, of working-age Americans want full-time work and can't find it.
Aging boomers are less likely to lose their jobs than younger workers. But when they do, they have a tougher time finding new ones. Would-be employers tend to choose younger, cheaper applicants. Some fear that older workers will bolt for a better-paying job once they can.
In a survey of the unemployed, the Rutgers researchers found that 80 percent of those older than 50 have been out of work for more than a year. And half have been unemployed at least a year.
Many have drained their retirement savings and lack health insurance. Nearly half plan to apply for Social Security benefits earlier than they had intended to.
Peter Cohen, 59, a veteran Hollywood video producer, has been out of full-time work since October 2008. Cohen, who specialized in using Apple equipment as a producer since the 1980s, was shocked to be turned down recently for a retail job at an Apple store.
"The savings account has been depleted, and we are now living out of our stock market account, which might get us through another year," Cohen says. "After that, it will be time to hit the 401(k), which might get us to Social Security."
Unemployment, job insecurity and dwindling wages are preventing consumers from spending freely. Many big companies can turn to fast-growing markets overseas to compensate for slumping U.S. sales. But most small businesses can't.
Small companies surveyed by the National Federation of Independent Business have cited weak sales, rather than perennial gripes like high taxes and burdensome regulations, as their No. 1 problem.
Among those sweating the jobs crisis is President Barack Obama. He's up for re-election in just over a year. September's 9.1 unemployment rate and tepid job growth suggest he'll be presiding over an economy so weak it could feel like a recession. No president since World War II has faced re-election with unemployment this high.
"Until we see a consistent trend suggesting progress (on the economy), it's going to remain the dominant issue and a pretty big negative for Obama," says Andrew Kohut, president of the Pew Research Center.
The unemployment crisis is helping depress the housing market. Many homeowners owe more on their mortgages than their houses are worth. Others can't afford to sell their homes and trade up to new ones. And a backlog of foreclosed homes is keeping supplies high and prices low. Not even record-low mortgage rates have helped.
Analysts say that housing won't recover as long as unemployment remains stuck at recession levels. Sales won't pick up until Americans are confident enough in their job prospects — and have the wages to support a down payment — to consider buying a house.
"It used to be that housing led the recovery, and jobs would come after," says Lisa Ann Sturtevant, a public policy professor at George Mason University. "It has to go the other way now. The jobs have to come first."
So far, they aren't coming fast enough to make a difference.
Last updated: 6:46 pm Thursday, December 13, 2012