By Tanner Strutzenberg on October 17, 2011

Let's face it. Unemployment is a bummer. I'm not even talking about financial hardship. The psychological and social burden of unemployment weighs just as much as the economic. Millions of Americans know this after sending out hundreds of résumés and applications and finding virtually nothing available that suits their skills and experience.

As a recent college graduate in the job market, I'm quickly becoming acquainted with the feeling. It's hard to resist the urge to telekinetically strangle the talking heads in the news media railing on the lazy unemployed trying to steal the hard-earned wealth of decent hard working Americans. The truth is that unemployment can be hard, dreary, tedious, and oftentimes seemingly futile work. Unfortunately, telekinesis remains far beyond my skill set.

The point is that after several months of unsuccessful career searching, it can be easy to start to believe that maybe your skills just aren't good enough or maybe you're just not trying hard enough. Maybe you are one of the legion of lazy unemployed leeches on society. This, of course, can quickly become a self-fulfilling prophecy weighing heavily on the heads of millions of families across the United States.

However, the vast majority of the unemployed in this country are not idle moochers, but rather talented workers with skills of great value that are currently sitting idly in a depressed job market. Our economy loses just as much from the absence of their services and skills as the unemployed suffer from lost income.

It is my belief that most Americans want more than just a paycheck from their work. They want to be engaged, to grow and exercise their skills, and be proud of what they accomplish in their employment. Long-term unemployment not only creates financial hardship, but deprives many of the pride they take in their work. And in my opinion, taking this pride away has more devastating consequences than financial hardship.

So what can be done to remove the malaise of the idly unemployed? My suggestion is to spend less time job hunting and more time volunteering in our local communities.

The premise is simple: provide something of value to your community and the rewards will follow. Instead of stressing about that gap in your recent work history, spend several hours a week volunteering for a charity that can use your specific skill set. Not only are you doing a good deed, you're keeping your skills sharp and showing your future employer that your head is still in the game.

Can't find anything to suit your skills? Use your volunteering as an opportunity to learn something new. Most non-profits can find something to do for any willing volunteer with a pulse. Again, not only are you providing something of value to your community, you're showing prospective employers your ability to quickly learn new skills. Who knows? It could even open up job opportunities in new fields.

Perhaps you don't feel you have time to sacrifice from your job hunt to spend time working for free. Yes, volunteering is all fantastic and high-minded, but the bottom line is that you need a steady paycheck before you can begin to indulge your more benevolent impulses.

But think of all the networking possibilities you forego meeting new people with shared interests and ambitions. Why not simply consider your volunteering time as a networking tool? The fact of the matter is that this presents a great opportunity to help others as well as yourself.

Put on your starry-eyed glasses and think of the potential impact of millions of unemployed Americans voluntarily performing the community services that so many other Americans are in dire need of at this time. Organized groups can raise funds from corporate donors for community projects (and probably make some nice contacts at the same time). It is only a matter of time before the value created by these services turns into real increased economic demand as people get back on their feet. Revitalized communities will soon demand new employees as neighborhoods and communities bounce back. And you can bet new employers won’t forget those who led the charge.

Create something of value, and wait for the rewards to come. It's not a prophecy, it isn't sage wisdom, it isn't magic. It's putting faith in yourself, your skills, and your community. It's rejecting that nasty feeling that maybe you just don't have anything to offer. It's proving to yourself and others that you have something valuable to offer. And once you show how valuable you can be, it’s only a matter of time before someone else notices.

By Tanner Strutzenberg on August 8, 2011

“You can’t always get what you want,” says Mick Jagger, “but if you try sometime, you might find, you get what you need.” Congress got neither with the deficit reduction plan passed last Monday. Instead, it got what it deserved on Friday as Standard and Poor’s dropped the United States sovereign debt to AA+ from AAA. Global markets responded quickly, with the Dow Jones Industrial average shedding approximately 7%, Tokyo losing 5.5% (4% on Friday alone), and London down almost 11%. This is hardly good news. However, several prominent market analysts are saying the credit rating cut isn’t necessarily bad news, either.

Last Monday, Congressional leaders announced a bipartisan plan to reduce the long-term federal deficit and increase the debt ceiling to avert a default on U.S. Treasury securities. The deal promises over $900 billion in long-term cuts now and a mandate to cut another $1.5 trillion by the end of this year. How is this additional $1.5 trillion to be decided? The bill authorizes a bipartisan "super-committee” to identify future cuts. It’s rather apparent that taxpayers and investors have little patience in additional committees, however super they may be. If the treasury got a dime every time legislators authorized a new committee, we probably wouldn’t be in this mess (Zing!). The $2.1 trillion package fell well short of the $4 trillion analysts say is required to put U.S. debt on solid ground. In short, Congress did the minimum to get by and passed the buck on further down the road. Standard and Poor's called the deal out for the turd it was and downgraded the government’s credit rating.

So why isn’t this bad news? Because investors don’t need to wait for the rating agencies to recognize a turd when they see one. All of the aforementioned markets fell steadily throughout the week in reaction to the deal itself, so no one was really shocked by the time the downgrade was actually announced. Markets have continued to decline thus far today, but treasuries have rallied as global investors continue to seek safety in American assets. Gold is also up over $1700/oz. due to the flight to safety, but exchange rates have only marginally weakened between the Dollar and other major currencies.

According to Vassili Serebriakov, currency strategist at Wells Fargo, "One of the reasons we don't really think foreign investors will start selling U.S. Treasuries aggressively is because there are still few alternatives to the Treasury market in terms of depth and liquidity.” Only four other nations – Canada, France, Germany, and United Kingdom – have AAA ratings. France and Germany are both tied to the Euro, which is far less stable than the Dollar due to debt crises in Greece, Ireland, and Spain. Neither Canada nor the U.K. have debt to satisfy demand for global currency reserves.

The downgrade to AA+ is a major blow to American prestige, but still signifies a very low risk of default to investors. The Oracle of Omaha, Warren Buffett said on Friday that he would rate American debt at “quadruple-A” if such a rating were available. So speaketh the Oracle: "If nothing else takes place, meaning, if all other variables hold and there isn't say, a new problem in Europe, it won't make any difference. The U.S., to my knowledge, owes no money in currency other than the U.S. dollar, which it can print at will. Now if you're talking about inflation, that's a different question."

If any good can come from the situation, Congressional leaders will take the message that they need to take long-term deficit more seriously than they have thus far. Remember, the downgrade was caused by congressional inaction. It’s specious to blame the tumble on the ratings decline when the decline was a simple response to fiscal inaction on the part of the U.S. government. I predict markets will recover as quickly as they collapsed if (and this is a big if) Congress can put forth a credible deficit plan to clean up their fiscal act over the next 10 years. In the meantime, don't expect the sky to fall on the American economy.

By Tanner Strutzenberg on July 28, 2011

With all the sovereign debt crises currently rocking the global economy, including the impending default of the U.S. Government, a small but vocal minority has been gaining traction advocating the abolishment of the Federal Reserve and a return to the gold standard. This is perhaps understandable given the great uncertainty in the Dollar and the American economy, but nonsensical nonetheless.

The most important thing to know about value of gold in the monetary policy debate is that it is a rock that is found buried in the ground. Its value is determined by the dynamics of supply and demand just like any other commodity. As such, it is no more or less vulnerable to speculative asset bubbles or price manipulation in financial markets.

The value or fiat currency is backed only by the promise of the U.S. Treasury, which ultimately means the value of the Dollar is backed by nothing but the popular belief that a Dollar is valuable. Gold money, on the other hand, is theoretically redeemable for gold bullion. Gold! The advantage is that the Dollar’s value is backed by an inherently valuable asset. But what determines the value of gold? We quickly arrive right back where we started. What makes gold valuable besides a popular belief that gold is valuable?

The strongest argument for the gold standard is that it removes the influence of bankers and politicians - undoubtedly guiltless parties - over the value of the Dollar. The Dollar is ultimately a measure of wealth, and allowing central bankers and politicians to inflate the currency diminishes everyone’s wealth. But the problem with removing the measure of human wealth from human agency is that the measure of wealth is then arbitrarily regulated by the supply of a rock that is found in the ground. Over the long run, the American economy has grown quite steadily and predictably. Even the present recession promises to be a short detour on the long run growth trajectory. As the economy grows, it is perfectly intuitive that the money supply must grow proportionately. How is this supposed to happen if the creation of new money is incumbent on the discovery of new supplies of a rock that is found in the ground? If new gold supplies cannot be located, deflation of the Dollar will be a certainty as real output increases.

Furthermore, imagine if the new supplies of gold are found on foreign soil. Currently, many Americans are concerned about the leverage China wields over us by holding our debt. These holdings currently only account for 8% of all American treasury debt. Imagine the consequences of the Chinese, or any other adversarial power finding a major lode of gold within their borders. If one’s imagination needs to be jogged, I suggest looking toward our relationships with the producers of another vital commodity, oil, for a starting point. As an aside, I would suggest that if we were to tread down the well-worn road of commodity money in the future, crude oil, rather than gold, would be the commodity of choice on which we hypothetically ought to peg the new currency.

A return to the gold standard is nothing more than economic medievalism: a return to a time when wealth was measured by the monarch who sat on the largest, shiniest pile of gold. Fiat currency will never be a perfect currency system because it is ultimately a human currency. The creation, storage, and measurement of wealth are all uniquely human endeavors, carried on by human beings, and subject to human imperfections. This is true of central banks and the halls of Congress. Still, I’ll take the problems that come with a fiat currency system any day over the week over a return to dark ages of monetary policy.

By Tanner Strutzenberg on July 12, 2011

I painted a fairly bleak picture of structural unemployment in my previous post. First, let me reiterate economists do not agree on any quantitative measure of structural unemployment in the economy, nor do they agree that it is a pressing issue moving forward. Paul Krugman has argued that structural unemployment is a non issue under present circumstances, while Narayana Kocherlakota of the Minneapolis Fed is worried that structural unemployment is ultimately eroding the Federal Reserve's capability to fight high unemployment through conventional monetary policy tools. I'll let the experts continue haggling over the precise extent of the problem. If President Kocherlakota is correct, however, policy makers need to ask some serious questions about the efficacy of monetary policy moving forward.

Cyclical unemployment, the kind of unemployment arising from downturns in the business cycle, can be addressed by the Fed by lowering short term interest rates to give businesses greater incentive to invest in new production, which of course requires new workers. The key idea here is that the Federal reserve can stimulate the demand side of the labor market - employers looking to hire new workers.

Structural unemployment is essentially a phenomenon of the supply side of the labor market. Employers are looking to hire, but the right workers simply aren't available to fill the needed positions. Dropping interest rates can help incentivize would be employers, but cannot address the fundamental lack of supply for labor in the desired positions.

So what can be done at the policy level to help workers find the skills needed to fill new jobs? That's a tough question. Making a decision to uproot one's family to a new location where jobs are plentiful or to learn new skills is something few people take lightly. In the most recent recession, the federal government extended unemployment benefits to keep families solvent while these issues work out, but this is a band aid solution at best.

A more robust solution? Policy makers need to focus more on the solutions readily available to them. American community colleges provide an affordable means for people of all ages and backgrounds to learn new high-demand job skills in a relatively short time. This is particularly true in the health services industry, where a two year degree in nursing or physician's assistance can open the door to jobs in an industry struggling to hire qualified candidates despite the high unemployment numbers.

Community colleges offer a number of remediary, certification, and continuing education courses as well as many other resources to help unemployed Americans change the course of the career or simply stay at the top of their game.

What other options are out there to help gain new skills in a hurry? I'm curious to hear your advice (No, I'm perfectly content blogging at the moment. No, honestly!) I'd also like to hear the experience of those who have struggled for an extended time to find employment. Are jobs available in your area, or simply jobs you are unqualified for? Have any of you seriously considered returning to school or relocating in hopes of finding greener pastures? Inquiring minds want to know.

By Tanner Strutzenberg on July 7, 2011

The phrase "jobless recovery" is one we have become all too accustomed to hearing in the financial news.  Economists assure us economic growth is underway, but most Americans take little comfort in knowing that the recession officially ended in June 2009.  At that time, the official unemployment rate was 9.5%.  Fast forward 24 months to the present, and the most recent figures from the Bureau of Labor Statistics place the official rate at 9.1%.  Over the past 2 years, GDP has grown at an approximate average annual rate of 2.4%, while unemployment has only fallen by a net 0.4% over the same period.  The failure of the recovering economy to create new jobs has led many economists to speculate that the labor market is suffering from something much more severe than simple lack of demand for workers.

Many economists fear structural unemployment has taken hold in the American economy, which occurs when the workers available lack the necessary job skills to fill positions in growing sectors.  For example, a carpenter who has been laid off from his job in the construction industry cannot readily go seek employment in a booming sector like information technology or health care.  Thus, while job openings exist, the unemployment rate will not decline until more workers have the skill needed to perform the jobs available.

It is extremely difficult to calculate the percentage of structural unemployment in the labor market as a whole.  Take our carpenter again as an example.  The carpenter has been out of work for, say, 18 months now because there are no constructions projects going on in his area.  The housing market collapse, however, is a largely cyclical phenomenon.  There was a bubble that burst, and now the market is slowly sorting through the issues created by oversupply in the past decade.  In several years, the market will rebound and carpenters will again find new employment opportunities.  It seems easy enough to simply put a check next to the carpenter's name in the cyclical unemployment column.

On the other hand, no one would seriously say to the carpenter (who deserves a name at this point) "Don't worry, Jeffery, you're cyclically unemployed, not structurally unemployed.  Just wait it out a few years and you'll be right back to work."   Presumably, our carpenter has pressing financial obligations, not to mention mouths to feed that cannot wait several years.  The carpenter needs to either continue searching for work in an extremely tight market, move to another location where perhaps jobs in his field are more readily available, or begin looking for work outside his industry.  Thus, as we can see over time, cyclical unemployment becomes structural unemployment.

The issue of cyclical versus structural unemployment are naturally of great interest to tenured academics and financial market analysts, but why does any of this matter to our Jefferey?  Let's review his options.  He hasn't had any luck finding work in his present location over the last 18 months, so let's rule that out.  He needs to either move to a more promising locale, or look at gaining some new skills so he can seek employment in a different sector.  Both options are quite costly, both financially and in non-pecuniary terms.  Now imagine millions of Americans precisely in Jefferey's situation, and you can begin imagining the problems associated with widespread structural unemployment.

What sectors are hiring?  Which ones are stagnating?  And what can be done at the public policy level to help workers find new jobs in new sectors?  Tune in later this week to find out how structural unemployment could effect your bottom line.