Is America Headed for a Permanent Underclass?

Rate this post

It appears more and more economists are beginning to think so.
By Howard Gold
NEW YORK (MarketWatch) — Slowly, over the last year, it’s begun to dawn on us: The economic recovery isn’t really making a dent in unemployment. 
The public knew this much earlier than economists or pundits did, and as for politicians — don’t ask!
Survey after survey showed Americans didn’t believe the economy was recovering. And people who commented on MarketWatch articles have been downright hostile to any notion that either the markets or the economy were getting better.
But economists need hard data before changing their minds. And over the past few months, more and more of them have concluded that indeed the depth of this particular recession and its roots in the financial crisis have combined with structural changes in the economy to push the so-called “natural” unemployment rate in the U.S. permanently higher.
Read Howard Gold’s analysis “White-Collar Recession, Blue-Collar Depression” on
If they’re right, it would be bad news for millions of Americans whose prospects are bleak enough already. It also would make the U.S. economy more like the Europe we’ve routinely derided — without the social safety net European countries typically provide.
I hope I’m wrong and the fabled American ingenuity in which I strongly believe — and whose most shining star, the great Steve Jobs, died last week — kicks in with new fervor.
But it looks increasingly like that will not be a panacea this time around, either.
Listen to Charles Plosser, president of the Federal Reserve Bank of Philadelphia, in a speech a couple of weeks ago.
“These numbers are troubling, especially when more than 40% of the unemployed, or some six million people, have been out of work for 27 weeks or longer,” he said.
“Millions of unemployed workers may take longer to find jobs because their skills have depreciated or they may need to seek employment in other sectors. These structural issues will take time to resolve. Jobs and workers will need to be reallocated across the economy, which is a long and slow process.”
A structural change
Did you catch the word structural? It was no accident. Here’s Atlanta Fed president Dennis Lockhart in a speech two days earlier.
“To me, it is not clear to what degree structural factors are impeding the filling of job vacancies,” he said.
“And… it is not clear to what extent the long-term unemployed are becoming a class of permanently unemployed, creating a problem resembling the so-called structural unemployment of some European countries.”
Again, notice the use of the word structural — twice. And note how Lockhart speculated about a “class of permanently unemployed” which he compared with “some European countries.”
When top officials start speaking like this within days of each other, something’s up.
You will find the rest of the article at this link.

Mr. Gold goes on to correctly identify the horrible housing market as being one of the impediments to economic recovery. I have long felt that real estate, both commercial and residential, have always been one of the main underpinnings of our economy, as you could always count on prices to at least remain steady, if not actually go up – regardless of the economic conditions.
We do not have that anymore, and as someone who spent over twenty-five years in a related industry, I do not see it coming back anytime in the near future, as I believe we are looking at at least a decade for this to flesh itself out – perhaps even longer.
Gold also mentions that companies are sitting on piles of cash but are not hiring. I wish he had expanded on this a bit, as I think one of the main reasons is that employers are uncertain about, and not a little scared of, massive government regulations that are beginning to come on-line, both the ones that are known as well as what may be coming down the road but are yet unknown.
One thing is certain – as long as the current administration remains in power, there is not going to be any economic recovery to speak of, and it is beginning to look to me like another major downturn is just around the corner.
Better hang on tight, because I think we are in for a long, hard ride.

Please follow and like us:

0 responses to “Is America Headed for a Permanent Underclass?

  1. Benefits ol’ George Soros and left/liberals politicians who need OWS-goers/voters to rile-up for their cause just fine…

  2. The people at the protest, need to be sitting before the White HOuse and Congress, where the power is vested. Obama needs to be FORCED to resign as he has done NOTHING good for this country but undermine it every way possible. Plus, he cant even prove what his real name is, or provide a valid, authenticated, Birth Certifcate. AS far as we know, his legal name is Barry Soetoro and he also uses a security number, which cant be found in the System, I;ve heard, so he may not have paid taxes in 26 years or so. I bet barry has a birth certificate that says Barry Soetoro, because his original birth certificate was destroyed when he was adopted I believe.

  3. obama and crime inc. are not here to improve anything,they are here to destroy. the ows are just so many useful idiots.don’t get me wrong i don’t have any love for the republican party either,they are taking us to the same place only at a slower pace

  4. Outstanding post, Dave.
    Actually, America isn’t just “heading” toward a permanent underclass, we’ve had a permanent underclass for some time now. Just look at the multi-generational class of people who subsist on welfare — food stamps, subsidized housing, Aid to Families (single mothers) with Dependent Children, Medicaid….
    Multi-generational = permanent.
    As for the structural changes hinted at by Gold, political economists have been writing/talking this for decades. The U.S. economy today is a de-industrialized economy where farming is miniscule, manufacturing is out-sourced, and supposedly we have transitioned to being a post-industrial technology- and knowledge-intensive economy. Except the majority of Americans don’t have the education, training, and (let’s face it) smarts to do those high-tech knowledge-intensive jobs — computer IT, medicine, law, etc. — which require a post-graduate (post-Bachelor’s) degree.
    In the old manufacturing American economy, one can make a good living without a college degree by working in the auto industry, for example. That was the American middle class.
    Unlike the OWS protesters, I do not believe an evil conspiracy is behind this. It’s simply how economies develop: As labor costs in manufacturing rose, the U.S. simply lost our “competitive advantage” to new industrializing countries who offer cheaper labor. The U.S. is supposed to shed the old manufacturing skin, out of the chrysalis a new post-industrial (hi-tech, hi-knowledge, highly educated) butterfly was supposed to emerge.
    It remains to be seen whether the butterfly will burst out or whether it’s still born. The signs are not looking good.

    • Of course, we could make our Education system like it was when only an Eighth Grade education was required and high school was optional & prepared one for a better life beyond that (only updated for modern knowledge/technology)… but, no, lets require “free” college for everyone (not “K-12,” but “P-16”) where students take at least semesters of Shop Class making napkin holders for “vocational lilteracy” and need a Master’s degree to prove they’re functional literate in order to actually get a job where they’ll eventually make minimum wage and be taxed over 50% due to the costs of all that.

      • High school prolong adolesence? Heck, that was college 20 years ago before it got REALLY bad. 🙂
        We’ve spread the same (or less) learning over more years of schooling and now have scads of entitled Occupy Wall Street folk who believe it was a Captalist plot to mire them in hopeless debt for various “studies” degrees after six or seven years of partying in order to bolster the “surplus army of the unemployed” to keeps wages of the “working man” (not to mention their own ability to play X-box all day into their late-20s) down while they wear Che t-shirts and talk about it on their iPhone 4S.

    • “we’ve had a permanent underclass for some time now.”
      Correct, but the difference is those who now find themselves as new members of said underclass didn’t choose to be – unlike their second and third generation “peers.”
      I agree that the economic transition went awry and never fully materialized.
      I think there are several contributing factors:
      Tax policy and regulatory policy.
      A 35% corporate tax rate is obscene, and when you combine that with increasingly burdensome (as well as ever more expensive) regulations, it’s easy to see why there is around $13-16 Trillion (depending on whose numbers you believe) being held off shore and is being used to create jobs in places like China and India.
      A lot of that money has already been taxed once, and I have to say I don’t really blame those who control it for keeping it out of the clutches of government.
      It’s sort of a screw me once, shame on you, screw me twice, shame on me scenario.
      Actually, I think there are far too many lawyers in this country which, combined with government regulation and stupid malpractice laws (thanks to the lobbying efforts of aforesaid bus-loads of lawyers) has helped to cause a doctor shortage. We have one here.
      Americans just aren’t going to medical school like they once did, as they just don’t see it as being worth it. It takes forever and ten years to get through it, and if you don’t have a full scholarship, you are going to rack up some serious debt along the way.
      And when you combine that with Obamacare and its “cost controls,” they might not make enough to even pay off their loans before they hit retirement.
      Nobody wants to go through all that to end up being a government doctor making $48k/yr, then get sued out of their underwear for putting a band-aid on crooked.
      It a mell of a hess, all right.
      I think it can still be turned around, but only if we get the right sorts in the right places in government.
      Merely putting repubs in the WH and in control of congress won’t be enough, as we have to start getting the leftycrats out of government agencies from top to bottom, then get rid of the agencies themselves, rip up and discard reams of regulations, and fix our confiscatory tax system.
      If we do all that, we might have a chance.

  5. Well this is just depressing…
    How’s everyone loving that hopeandchange now? Stoopid sheeple…

  6. I think I know we are in for a long hard ride-one way or another.

  7. I have some Good-News and some Bad-News!..First the Bad- News:
    The American Economy Thrives on Confidence In That Economy To Grow and Expand!The E.P.A. and Government Over-Regulations, (at All Levels of Government), Legacy Cost of Unions Contracts, (and No-Right-to-Work-Laws in Most States), Heath Care, Taxes, Libilities, Insurance Cost, Utilities, and etc., All Contribute to weather it is A Corporation wants to continue to Do Business in America?, or Move Elsewhere, where Profites can be shown to Their Stock-Holders?
    I live in Maryland where a couple of years ago ,Md. Raised Taxes On Millionaires, “ONE THIRD OF THEM MOVED OUT-OF-STATE RIGHT AFTER THAT INCREASE IN TAXES BECAME LAW”!
    All of, Our Money, that, Our Government, Thru into , The Economy, Did Nothing to, The Confidence, for Those Holding Onto Investment Money!…It Worked In Reverse-Confidence In Our Economy!
    How many of You that read FOTM believe that, if Your Guy is Elected President, that American Confidence In the Economy Will Return and That Investor Money Will Begin To Flow, Into That New-Found Confident-Economy?..Do You Believe A New Administration In Wasington “Will End” America’s Econmic Woes?
    Now the Good-News:…… “There Is No Good-News!”


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.