Unemployment is disastrous on both the individual and societal level.
Individuals who look for work but can't find it are miserable.
On the national level, high unemployment is both cause and effect concerning other problems with the economy. As we'll see below, high unemployment results from a weak economy and - in turn - weakens the economy.
Until the causes of, and solutions to, high levels of unemployment are understood, we will not be able to solve the problem.
How High is Unemployment?
Before we can even start looking at causes or solutions, we have to understand what the current level of unemployment really is, and what the trends portend for the future.
Let's use America as an example. With the
largest economy in the world, it has often been said that "when America
sneezes, the rest of the world catches cold". And much of the rest of
the world has adopted the "Washington Consensus" - America's neoliberal
view of economics.[1]
Moreover, the rest of the world has been infected by many types of
"toxic assets" invented in America, such as credit default swap
derivatives[2],
as well as Wall Street style banking strategies. So I will use the
United States has a case example, but will also touch on global trends.
Specifically, the official unemployment
reports of the Department of Labor's Bureau of Labor Statistics (BLS)
provide conventional "U-3" figures and various alternative measures
including "U-6". [3]
For example, as of December 2008, U-3 unemployment was 7.2 percent, while U-6 was 13.5 percent. [4]
U-6 is actually more accurate, because it includes those who would like full-time work, but can only find part-time work, or have given up looking for work altogether.
As can be seen by the December 2008 figures, U-6 unemployment rate can almost double the more commonly-cited U-3 figures.
But those in the know argue that the real rate is actually even higher than the U-6 figures.
For example, PhD economist John Williams [5] and Paul Craig Roberts [6] - former Assistant Secretary of the Treasury and former editor of the Wall Street Journal - both said in December 2008 that - if the unemployment rate was calculated as it was during the Great Depression - the December 2008 unemployment figure would actually have been 17.5%.Williams says [7] that unemployment figures for July 2009 rose to 20.6% [8].
According to an article [9] summarizing the projections of former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart, U-6 unemployment could rise to 22% within the next 4 years or so.
As the New York Times pointed out in July [10] :
Include [those who have given up looking for a job and those part-time workers who want to be working full time] -- as the Labor Department does when calculating its broadest measure of the job market -- and the rate reached 23.5 percent in Oregon this spring, according to a New York Times analysis of state-by-state data. It was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it.
Indeed, the chief of the Atlanta Federal Reserve Bank -Dennis Lockhart - said in August 2009:
