Is America Headed for a Permanent Underclass?


It appears more and more economists are beginning to think so.
Via marketwatch.com:
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 MoneyShow.com.
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.
-Dave 

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Anonymous
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Anonymous

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

Martha Conner
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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… Read more »

ken
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ken

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

Dr. Eowyn
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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… Read more »

Anonymous
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Anonymous

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.

Anonymous
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Anonymous

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… Read more »

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

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

Dennis K.
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Dennis K.

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… Read more »