Psst, kids: Great news! Doesn't this make you feel better?
The 6.8 million Americans out of work for 27 weeks or longer -- a record 46 percent of all the unemployed -- are providing U.S. companies with an eager, skilled and cheap labor pool. This is allowing businesses to retool their workforces, boosting efficiency and profits following the deepest recession since the 1930s, and contributing to a 61 percent rise in the Standard & Poor’s 500 Index since March 2009.
“Companies are getting higher-productivity employees for the same or lower wage rate they were paying a marginal employee,” said James Paulsen, who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “Not only are employees higher skilled, you have a better skill match. You have a more productive and more adaptive labor force.”
Falling wage pressures will help keep inflation low, contributing to lower Treasury-bond yields, according to Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. He forecasts 10-year Treasuries will yield about 3.1 percent in the third quarter, compared with 4 percent in April.
The lack of wage pressure also “reinforces the case for globally exposed companies” because “there has been better cost containment in the U.S. than in some of our competitors,” said Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York. He said this would benefit businesses such as Cincinnati-based Procter & Gamble Co., the world’s largest consumer-products company, and Atlanta-based Coca-Cola Co., the world’s biggest soda maker.
Fired workers from Wall Street to South Carolina, where 58 percent of the unemployed have been without work for six months or longer, say they are networking, going back to school and retraining to stay relevant as jobs become more specialized. Some still may not achieve comparable positions, and Federal Reserve officials say lasting joblessness may weigh on economic growth.
“There is a structural dimension to unemployment that looks persistent,” Neal Soss, chief economist at Credit Suisse in New York, said in an interview. “Regrettably, it feeds on itself. People who have been out of work half a year or more naturally are going to have a harder time re-engaging on satisfactory terms. Their skills can atrophy, and their attitudes toward life and work can be damaged. It is debilitating.”
Come on, now, Neal, use the old noodle. You can always use them for Soylent Green, the tasty snack food! And someone can figure out a way to desalinize and monetize the tears of the unemployed first....
Yes, kids, this is the key to national productivity. Stop me if you've heard me say this before: Cheap. Disposable. Labor. Economist Douglas A. McIntyre at 24/7 Wall St.:
The secret to the amazing increases in productivity in the American economy is finally out. Companies in the US are not hiring full-time workers. They are gambling that they can keep their margins high by keeping a vast part of the workforce, perhaps millions of people, unemployed.
Unemployed people, it turns out to no one’s surprise, will work for very little. And, they will work without benefits, without job security, and without complaint.
According to Bloomberg, “The 6.8 million Americans out of work for 27 weeks or longer — a record 46 percent of all the unemployed — are providing U.S. companies with an eager, skilled and cheap labor pool.”
The development is a revelation, and a good one, for companies, municipalities, and states, all of which are tight on cash and unable to get credit at reasonable rates if at all. The nearly 10% unemployment rate in the US is supposed to come down late this year and early next. This assumes that companies with improved prospects will hire full-time workers as they have for decades. These workers have had pensions, benefits, and vacations. That makes a person who makes $40,000 cost $50,000 or $60,000. Employers want to bring the effective cost of that same worker down to $35,000 or perhaps $30,000.
While of course keeping the costs of housing, food, and gas up. So it's a win/win!
Not only are the Democratic elites not going to stop it, they're cheering from the sidelines. Here's what Digby had to say about a bizarre exchange today between The Nation's Chris Hayes and "liberal" asskisser Jonathan Alter on The Ed Show:
Keep in mind that Alter is an elite liberal villager with strong ties to the administration. And he not only wants to lay the problem at the feet of "liberal orthodoxy" which is insane, but he's completely delusional about the congress's ability to pass any jobs legislation that costs money --- after all, they can't even extend unemployment benefits. On what planet does there exist the slightest possibility of passing a direct jobs program with or without David Bacon? And why in the world would we want to pay people less money when the whole point is to stimulate the economy? We don't want to spoil them?
I don't know if he's doing some light Heritage Foundation Report reading before he goes to bed at night but I'd guess, considering his professional and social circle, that this is reflective of the conversations that are being held among liberal Villagers, some of whom may very well be in the congress and the White House. This dry abstraction, and the idea that we just have to "adjust" to a permanently higher unemployment rate is just offensive. I wonder if Alter would be so sanguine about such a thing if he were among those who found themselves suddenly among the permanent underclass? (Not that he would --- this sort of thing doesn't happen to hard working, productive people such as he ...)
And good for Hayes for saying at the end that he still believes in Davis Bacon. The look on his face was priceless --- he kept it together nicely but was clearly gobsmacked by Alter's bizarre outburst. Who wouldn't be? It's so reflexively and anachronistically thirdway/DLC that if I closed my eyes, I could see Joe Klein blathering exactly the same garbage on Meet the Press circa 1992. That this kind of hippie punching is still so automatic among the elites explains a lot about why we are so very, very screwed. They just can't seem to help themselves, even if it makes no earthly sense at all.
I'll close out with part of a post from Slacktivist's Fred Clark, one of my very favorite bloggers:
In a couple of recent posts (here and here), Brad DeLong responds to the accusation that he and Paul Krugman are oversimplifying the current debate between austerity and growth.
Let's be clear: this accusation comes from those trying to defend the claim that 9.7-percent unemployment is acceptable. Worse than that, it comes from those arguing that 9.7-percent unemployment may not be high enough.
Which is a difficult thing to argue while still being a decent person.
