The Unemployment Thing

Here's why unemployment's still high- and why it'll be difficult for anyone to do anything about it.

1.  Houses.  It's finally turning the corner, but it'll still be a few more years before this market recovers.  The industry is simply still underneath too many bad debt rocks. 

2.  Technology.  Companies have figured out how to do more with less.  GDP, both overall and per capita is at an all time high.  In other words, the macro economy, as Obama has said, is "fine".  Actually, except for the 1990s, unemployment, over the last 40 years has AVERAGED 7%.  So, much as I hate the "new normal" cliche, unemployment in the 4s and 5s may be optimal, at best.  Average for good economic times, for most of our lifetimes has been unemployment rates in the 6s; bad times, in the 7s.  From 1974 to 1994 unemployment was under 6% for a total of a mere 24 months.  It would help people who lament thee current rates to know these grim facts. 

3.  "Hard money".  Banks have taken a "once bitten twice shy" approach to lending.  After making money ridiculously easy to get, circa 2003, it's now equally as impossible.  Businesses that rely on credit are still struggling because of this. 

4.  States are broke.  It's estimated that unemployment, right now, would be between 6.9% and 7.3% but for layoffs in state government jobs, and perhaps, if the cumulative effect of this were considered, much lower- perhaps as low as 6.5%.  Some of this is overreaction to Obama's election in conservative parts of the country, and part of it is overreaction to macroeconomic irresponsibility.  Americans are angry, and austerity seems a silver bullet.  Most of it, though, is necessity.  Unlike the Fed, states cannot print money, and carry trade deficits.  Some states even require balanced budgets, prohibiting deficits, altogether.  Good idea when money is abundant; BAD IDEA when it's scarce.  You don't borrow money when you don't need it.  Further, in recent years, the housing boom caused many states to shift nearly all of their revenue bases to housing.  Moreover, because many states did not anticipate the housing bust, and figured budgets years in advance, this caused a massive overbudgeting.  The good news is that many states are now solvent.  The bad news is that this solvency came at a very steep price not only for the states, but for their citizens, as well.