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Working Together
Work: Unemployment ... the 4% Solution
As the holidays draw near, many area businesses are in a crunch to find workers to fill the slew of temporary holiday slots that traditionally open up this time of year. The reason is not a mystery, at least not on the surface. The reason is the unemployment rate, which is near record post WWII lows. The Unemployment Insurance rate out of the Middlebury DET office is 2%. As low as that may see, the Burlington DET office, as well as Hartford-Lebanon and Randolph, are all reporting even lower rates. The higher rates, as you might guess, are out of the Newport office, with Enosburg not far behind. Both are hovering under 5%. So, at least in Addison & Chittenden counties, the rates seem very low, and in both historical terms and real terms, at least relatively speaking, they are. But what do the numbers actually mean. A quick glance at the numbers of unemployed for the Middlebury office shows 400 jobless last month. Up in Burlington, the number was 1,950. That means that there are, or were at the end of October, some 2,350 workers looking for work. Are there 2,350 jobs listed? Think about it. If you add up all the job listings you see in The Independent, The Eagle, The Fress Press, The Herald ... not to mention small locals like The Charlotte News, or The Hinesburg Record, or The Five Town News ... do you come up with 2,350 jobs? Probably not. So where the labor shortage? The labor shortage is partly real -- fewer people are without jobs when the unemployment rate goes down. But it's also partly fiction, because the numbers don't necessarily mean what most folks think they mean. First of all, real unemployment is always higher than the unemployment rate. The reason is that official rates are calculated using the number of those actually receiving unemployment insurance [UI]. If you were receiving UI payments but your time ran out, then, at least according to the numbers, you are no longer unemployed. So that means, for starters, that the numbers of actual unemployed exceed the numbers put out in state reports. This is true all over the nation, not just here in Vermont. But what is also true nation-wide is that we have a national policy to maintain sufficient unemployment. Actually, since the mechanism is through the Federal Reserve Board, it's more of a pseudo-policy. But the results are even more direct than many laws which pass through Congress. The national policy is to maintain unemployment at or above, though not too much above, 4%. This is one of the most compelling pieces of the puzzle when Fed Reserve Chair, Alan Greenspan, and his cohorts decide whether to raise interest rates. Take this eighteen months or so as an example. The stock market had been booming, sure. But it had been booming for a while before the Fed actually began to raise rates. It was not until the boom in the economy brought and kept unemployment rates perilously close to the magi 4% number that the Fed made their moves, and made them repeatedly. The Fed moves make some sense in terms of market economics. When unemployment is too low, it brings with it 'wage pressures', along with the threat of inflation. Wage pressure means that fewer workers, competing for more jobs, can begin to get selective about starting salaries or wages, and continuing employees can begin to push the envelope a little for raises or additional benefits. On the other side, to be fair, the Fed is also committed to keeping unemployment below a certain threshold, since too much unemployment lads to recession, with not enough money being earned to spend on goods to fuel the economy. But what the magic number is on the other end is anyone's guess. So far, so good. Right? Sure. Unless you happen to be 1 of the 25 people who will be in the unemployment line. Think about it. Go into your kid's school and count the number of kids, then divide by 25. Got the number? Good. Now, ask your school principal, or better, the school board, to explain at an assembly that that's how many of them will be unemployed at one time or another as a matter of national policy. Then be prepared for some interesting questions at the dinner table that evening. The last time a Full Employment bill -- a measure that would insure that everyone who wants a decent job can find one -- was introduced in Washington was back in the Truman administration, as America was getting ready for the biggest economic boom in history. Harry himself presented it to the Congress. It didn't pass. Now, like modern-day 2 x 4's, it seems we've grown accustomed to something less. Happy
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