Fed Easing No Long Term Fix for Structural Unemployment
By Joshua Zumbrun, Oct 10, 2010
Any action the Federal Reserve announces at its November policy meeting may not do much to help Timco Aviation Services hire 300 people. While a new round of asset purchases may help reduce cyclical joblessness, the result of weak demand in a battered economy, it may not have much effect on structural unemployment, losses caused by changes in the labor market.
“What you have is a great workforce in the local area that have been working in textiles or furniture, but they’re not trained in aviation-specific skills,” said Kevin Carter, the Greensboro, North Carolina, company’s co-chief executive officer, who is struggling to fill positions that require qualifications such as an FAA airframe and power-plant certificate.
Debate about what has caused the unemployment rate to stall at or above 9.5 percent since August 2009 is dividing Chairman Ben S. Bernanke’s Federal Open Market Committee. Chicago Fed President Charles Evans and Boston’s Eric Rosengren have downplayed the role of structural changes in recent speeches and favor additional action to boost the economy. Philadelphia’s Charles Plosser and Minneapolis’s Narayana Kocherlakota have said shifts in the labor market may reduce the effectiveness of additional Treasury purchases.
With the benchmark rate for overnight loans among banks near zero, policymakers have said they’re considering expanding the Fed’s balance sheet to boost the economy. Such a move should be done in increments, similar to the central bank’s gradual adjustment in the federal funds rate, rather than a “shock-and- awe” policy of announcing a large amount of purchases at once, St. Louis Fed President James Bullard said in an Aug. 19 speech in Rogers, Arkansas.
The Fed’s total assets are $2.3 trillion after it purchased $1.43 trillion in housing debt and $300 billion in Treasuries.
Desperate’ Job Seekers
So he has partnered with Guilford Technical Community College in Jamestown, North Carolina, to retrain people from local textile, furniture and other shrinking industries who are “desperate, looking for jobs but they don’t have the skills or the knowledge” for a new industry, said Ed Frye, chair of Guilford’s transportation-systems technology division.
The region has been especially hard hit because the collapse in global demand came atop a long-term restructuring of the economy as manufacturing jobs declined, Richmond Fed President Jeffrey Lacker said in a May speech in Greensboro.
Construction faces the most severe structural unemployment problems.
Dr. Pinna says:
I live in Florida.Â I can remember when many Floridians drove to North Carolina to buy their furniture.
North Carolina is a forest area with millions of hardwood trees which made excellent furniture. The furniture industry employed thousands of people. North Carolina also had enormous textile plants employing thousands of workers. The North Carolina economy was excellent, and the workforce was totally employed.
Then the workforce became unionized. It demanded all types of concessions from the factory owners. However, the factory owners were receiving calls from the Chinese Government.
“Bring your factories to China. We have good workers and no taxes!” The factories were transferred to China.
Today, the workers are unemployed. No amount of fiddling by the Federal Reserve will bring those jobs back.
Below is an example of the American Fat Cat syndrome:
Victor Calix Cruz, 51, has been job hunting for two years after being laid off from construction work in Miami. He, his wife and their two teenage children are “surviving” on his wife’s disability and his unemployment payments, he said. While he heard of openings at hotels, he hasn’t applied because the pay and benefits aren’t as good as what he had before.