Unemployment Predicted To Remain High
Friday, February 26, 2010
San Francisco Federal Reserve Bank President Janet Yellen visited San Diego earlier this week, and said the nation's unemployment rate will remain "painfully high" for a long time. How will the Jobs Bill that passed the Senate impact the local and national employment picture?
ALISON ST JOHN (Host): I’m Alison St John sitting in for Gloria Penner, and I’m joined by the editors at the roundtable These Days in San Diego. If the economy is showing signs of recovery, why are so many people who’ve lost their jobs still out in the cold? Military dollars are one reason San Diego is not doing as badly as some other regions. Are we bothered by the extra noise and habitat damage, the result of more intensive Navy training on our shores? And what to make of the turmoil at UCSD? The campus is boiling with passionate protest as feelings rise to the surface after the Compton Cookout. The editors with me today are David Rolland, editor of San Diego CityBeat. Dave, good to see you.
DAVID ROLLAND (Editor, San Diego CityBeat): It’s good to be here, Alison, thanks.
ST JOHN: And John Warren, editor and publisher of San Diego Voice & Viewpoint. Thanks so much for coming in, John.
JOHN WARREN (Editor/Publisher, San Diego Voice & Viewpoint): Thank you, Alison.
ST JOHN: And David Ogul, the assistant metro editor for San Diego Union-Tribune. David, it’s good to see you.
DAVID OGUL (Assistant Metro Editor, San Diego Union-Tribune): Great to be here. Outside of Olympic curling, there’s no place I’d rather be.
ST JOHN: Okay, well, that’s a compliment. Our number is 888-895-5727, that’s 888-895-KPBS. So we’d love to hear from you in this. Hopefully, you are also a fan of curling and a fan of editors and you’d like to join this program and keep the discussion active. So let’s get going with our first topic here. Just yesterday we got some very positive news on the jobs front from University of San Diego’s Alan Gin. His Index of Leading Economic Indicators for San Diego show help wanted ads are up a little bit for the second month in a row after being down all last year. And new unemployment claims are down, which is good news. But experts are predicting it’ll take a while for employers to start hiring again. So, John, why is unemployment here sort of lagging behind all the other indicators on the chart?
WARREN: Well, it has a lot to do with the makeup of San Diego. I mean, we have a high biotech industry that’s expected to show some rise but we have a lot of service, we had a lot of dependency on construction. New home starts have been down. Now we show some signs that they’re coming back up some, 282 permits over, say, 87 a year ago. But that’s not enough, in and of itself. And the military situation is one in which many people are in the military but they’re not hiring as much even though this indicator says that that’s an area where most jobs are being found in terms of military related industries. So a lot of those jobs are being taken by people who are actually retiring from the military and then going back into…
ST JOHN: Umm…
WARREN: …civilian jobs that are related to the area in which they were hired before. So those things make a difference. And I think one of the key observations that we want to make here and it’s been made nationally and that affects San Diego is that unlike other countries where people have had recessions, if you will, with high unemployment efforts, we have a scenario here where businesses are learning to do better with less. And so production is beginning to inch up but people don’t need as many folks as they had before and they’re finding ways to work leaner and so normally from an economic standpoint, the increase in production orders would mean increased hiring but that will not be the case this time. And I believe, as we’ve seen, that it’ll be another at least two years before we see some major turnaround in terms of employment.
ST JOHN: So, John, do you think that this trend of finding ways to do more with less is something that can last permanently? I mean, is it to do with putting into place better systems or is it making people work harder? And at what point are people going to burn out?
WARREN: Well, I think it’s a combination of many of the above. Many people will work harder and they will do more for less because they don’t want to join the ranks of the unemployed. I mean, this country now has an unemployment rate of, say, 10% or 9.5, in California close to 12. And when you look at where we are, back in 1978, we had a philosophy of full employment and we had a policy implemented that said that whenever unemployment reached 6.5%, then triggers would kick in in terms of extended unemployment benefits and training programs. All of those things are not on the boards at this point. Some of them are being tried as we see with the new bill coming through the Senate for employment but we have not kept up with that commitment and the unemployment we have now is a new kind of more permanent unemployment than the periods in the past when we could look to the auto industry or public service employment or CETA or some of those programs that bail people out.
ST JOHN: Since you mentioned that bill that just passed in the Senate, $15 billion bill to promote jobs, can you explain to us how it’s going to encourage employers to start hiring again and whether you think it’ll work.
WARREN: Well, I think it has a very unique feature in that it will waive the tax, the 941 tax, the Social Security payments. Those payments that normally drive cost up for employers will be waived for any person who is hired that has been unemployed for at least 60 days and who will be retained by that hiring employer for at least 12 months. And so that will make a difference because where dollars are tight, the unemployment or the 941 contributions that employers have to make makes a tremendous difference in terms of their desire to expand their payroll.
ST JOHN: So, Dave, do you think that enough is being done here to stimulate employment since that seems to be sort of at the core of so many things including, you know, foreclosures. Until people get jobs, the economy, it seems like consumers are at the base of the economy. So is enough being done?
ROLLAND: I’m not sure but it seems to me that the reason that 13 Republicans crossed the aisle on this bill might be because it is so modest. It’s a very hard thing to do to engineer employment in the private sector. I mean, you really – there’s a lot of factors involved and just providing a tax credit for new hires, you still have to be in a position, your business has to be in a good position to bring on new employees. I mean, you’ve got – It doesn’t – You know, the government’s not going to pay those people. You’ve got to be able to pay those people. It’s just a tax credit, and I think it’s very, very modest and I would be surprised if it really, you know, it was some sort of magic pill.
ST JOHN: So, David, David Ogul, is there something in San Diego that perhaps could make us feel a little bit more positive than at least areas elsewhere in the state about employment picking up?
OGUL: Well, I think that one of the things that would make people feel a lot better if home prices started going up a little bit faster than they have been. But, you know, I’ve got to agree with John over here. I think that, you know, the – I don’t want to downplay these economic indicators but there are – they sort of overshadow, really, what’s going on, what people are feeling. I mean, my…
ST JOHN: Umm.
OGUL: …son’s been looking for a job for months and with no luck. My nephew has decided that he’s going to go into the Army because his job prospects, even though he goes to college, are not that great when he gets out. So, you know, this is what people are dealing with. You know, as a manager, I could say, yeah, it’s great that people are working harder, they should work harder, but as a, you know, as a person who deals with the day-to-day challenges of going, you know, surviving this economy, it’s tough. It’s as tough as it’s been at least since the early 1980s.
ST JOHN: However, with Alan Gin’s indicators, they actually started showing negative signs long before the economy started, you know, really showing the strain, as it were. And so perhaps there’s a chance that it’s now beginning to show the positive signs before it’ll actually emerge on the surface. John.
WARREN: I don’t necessarily think so. I find in the media especially, everyone wants good news and so we find people who will give us theories and projected spins but, you know, the older we get and the more we look back, this is not something that’s new to us. What’s different is the manner in which we’re handling it. For instance, we had a law on the books some years ago called the Trade Adjustment Assistance Act, which was intended to train people in industries where their jobs were phased out due to technology or advancements. The government gave them so much in terms of training stipends and income for transitioning. Well, we don’t even have mention of that kind of program anymore. We had under CETA public employment to help local cities with teachers and fire departments in difficult times. We aren’t even talking about those things. So tax credits are very little help to someone who needs real dollars on the books or to the 1500 people that were standing in line in El Cajon last week…
ST JOHN: Umm…
WARREN: …at a job fair who have been unemployed, many for over a year.
ST JOHN: So in this situation, you are saying the government should be doing more.
WARREN: I think the government can do more but we’re at a philosophical difference because we have people in this country, for instance, of Republican philosophy which feels the government is doing too much.
ST JOHN: Right.
WARREN: And the Democratic philosophy feels the government should do more. And those two clashes leave the people in the middle as the victims.
ST JOHN: Dave.
ROLLAND: Well, it’s important to note the difference in the philosophies. It is really – there’s a difference in how to approach it but the result is kind of the same. Republicans don’t want government to spend money but they will support tax cuts, which has the same effect on, you know, on the deficit. It’s the same as spending money. You’re bringing in less revenue. So it, you know, has the same effect. I wanted to note that in 1982—I was looking at this this morning—in 1982, the unemployment rate was 9.7 I think for the year. And I pulled…
ST JOHN: In San Diego?
ROLLAND: No, no, no, in…
ST JOHN: Oh, nationally, okay, very similar.
ROLLAND: …national – yeah. And it took – and I think they considered that a not a jobless recovery, which they’re saying this is going to be a jobless recovery…
ST JOHN: Umm-hmm.
ROLLAND: …for a while, and I don’t believe that that was considered a jobless recovery. And it took until 1988 for the unemployment rate to go back down closer to 5%, which is…
ST JOHN: So it was six years.
ROLLAND: …kind of – Yeah. So, I don’t know. I’m – You know, I can – I continue to be, you know, concerned about this.
ST JOHN: And of course now we’ve had a couple of experts coming through San Diego saying that they don’t expect the unemployment rate to raise much, maybe around 8% by 2012.
ROLLAND: But – Yeah, and I think, you know, you’ve got – I – We already – In my opinion, we already had a problem even before this recession in employment, not in terms of unemployment but in terms of good employment.
ST JOHN: Umm.
ROLLAND: You know, wages, you know, wages have been stagnating for a long time. You know, with globalization and, you know, automation and everything, we’ve – this economy had been turning into a service sector economy for a long time. And so, you know, this just obviously made things, you know, this was – this was more an acute crisis but we had a chronic problem before that.
ST JOHN: We’d love to hear from you if you have any personal experience you can share with us. The number here is 1-888-895-5727. Have you had any luck looking for a job? If you’re out of work, are you hopeful the job market will improve soon? What’s your experience of this condition that we’re in? Now that point you just made, Dave, about jobs but what kind of jobs, I think is key, especially in San Diego because we’re in a position now of looking at trying to create new jobs. A lot of people in city governments around are talking about creating new jobs. Do you get the feeling that the jobs that they’re talking about are the kind of jobs you can survive on in San Diego? John.
WARREN: I don’t think so. And, you know, in San Diego we have what we call a sunshine tax which means that jobs that you could’ve gotten paid much more in another place, in San Diego you’ll get paid much less because there are more people here competing and looking for jobs. We got to understand when we’re talking about unemployment that unemployment is something that’s measured with indicators that change. For instance, if you are pregnant, in many instances as a woman you’re not considered as employable though you’re not counted as unemployed. If you’re a part-time student or you’re working part-time, then you’re not counted. If you’ve been unemployed and you’re discouraged then you’re not counted. And so when the numbers go up and down in terms of the count, the government, years ago, when I mentioned this whole full employment policy did not look at areas of the country in terms of just plain geography but it went into the Census Bureau and looked at single member, SMSA, single member statistical areas, and those areas of the country are divided into tracts of 2000 or more. And so then they measured unemployment within those areas and decided what area was most hit by unemployment. We’re not taking any – we’re not making use of past historical information and means of dealing with the current problem. We have people approaching it like it’s new, and it’s unfortunate because there are many good things that have been done to impact this situation.
ST JOHN: I must say it looks like some people are getting read for some more jobs in the construction industry at least. I mean, there’s a huge political controversy sort of boiling under the surface at the moment about project labor agreements and the idea being there will be some big construction projects coming down the line in the coming year perhaps at the city and who’s going to get those jobs. Do you get a sense that perhaps construction might be one of the first areas where there’s actually quite a bit of tug of war of who is going to get those jobs in San Diego.
OGUL: That’s one of the things…
ST JOHN: David.
OGUL: That’s one of the things that Alan Gin’s economic indicators point to. But there’s one thing that I want to point out and I think that this gets lost a lot in the debate, if you could call it that in our posturing in Congress. And that is we have to remember how close we came to an economic collapse in this country. Now that said, I’m not trying to, you know, excuse how bad the situation is because it is challenging. Everybody out – all your listeners know how challenging it is. But this is a sign, these are signs, albeit how minor or insignificant some people may say, that things are getting better. Yes, we have a long way to go but considering where we were a year to two years ago, quite frankly I’m a little impressed that it’s turned around this quickly.
ST JOHN: Good. Well, on that positive note I know everybody’s very uncertain about the future but we have to leave it on that uncertain note right now and go for a break. But stay with us. Coming up right after the break, we’ll be talking about the Navy’s plans to expand its training on the Silver Strand. I’m with us – I’m Alison St John. Stay with us here on Editors Roundtable.
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