Stephen Foley: US job market dogged by structural problems

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The Independent Online

US Outlook: You have to go digging for truffles in each month's employment report here, but the hotly anticipated figures for August do contain reassurance that the US labour market is at least not going backwards.

The rise in the headline rate of unemployment, to 9.6 per cent from 9.5 per cent, can be explained by people returning to the labour force, perversely a sign of confidence. The rise in average earnings of 0.3 per cent suggests employers are working their staff harder and aren't keen to see them leave. The overall decline in payrolls was less than feared, and comes on a July number that was revised up. The private sector was probably better than indicated, if you fillet out distortions to do with plant closures in the car industry.

None of this is to minimise the unacceptably high level of unemployment, or the unacceptably high level of under-employment, which adds in people discouraged from looking for work and those working part-time when they really want a full-time job. This latter measure has been hovering in the 16-17 per cent range for months.

President Barack Obama yesterday promised "ideas" to bring these figures down, and a new effort for legislation in Congress. Inevitably, with the November elections on the horizon, these will focus on short-term measures, but economists seem to be settling into a consensus that US unemployment will remain structurally high for many years, so it is long-term thinking that is now most needed.

One of the problems is that just when workers need to be more flexible than ever, negative equity and a moribund housing market make it hard to up sticks for a new job. At the same time, industries such as construction are unlikely to return to boom-time levels of employment and the growing numbers of long-term jobless could end up permanently out of shape for a return to the labour market.

Tax cuts for small businesses hiring and new government subsidies for clean energy are all very welcome in increasing demand for labour. But structural problems in the labour market require related – and more politically difficult – programmes in foreclosure relief and debt forgiveness, as well as a massive workforce-retraining scheme. Of which there is precious little sign.