U.S. Underemployment is 17.3%: 25M People

Newsweek's writer George F. Will says that today's underemployment rate, which includes the unemployed, plus those employed part time, plus those discouraged persons who have stopped looking for jobs is 17.3%. That is 25M people.

Moreover, nearly 40% of the unemployed have been so for seven months or more. Mr. Will says "which is not surprising: Congress continues to extend eligibility for unemployment benefits, apparently oblivious to the truth that when you subsidize something you get more of it".

he says that there is no precedent for what the nation might be beginning to experience, namely a torpid recovery from a steep recession.

"Today, Americans are still paying down their debts that fueled consumption between 2001 and 2007. Nevertheless, household debt is still 30 percent above what it was a decade ago, so deleveraging has a long way to go. And 23 percent of homeowners with mortgages are still underwater—the value of their houses is less than the amount owed on the mortgages.
The residential-real-estate sector triggered the recession, which now may bring a convulsion in commercial real estate. A quarter of a trillion dollars of loans must be rolled over in each of the next few years.

"With prolonged high unemployment predicted, consumer spending is paralyzed by caution. With Washington experiencing prolonged hyperkinesis, businesspeople are paralyzed by uncertainty about what the rules and costs of commerce are going to be. What would a cap-and-trade carbon-control regime do to energy costs? What will be the costs of whatever the Environmental Protection Agency decides to do on the basis of its "endangerment" finding that carbon dioxide is a pollutant? What will health-care and tax costs be? Money cannot be free forever, so someday interest rates are going to change. Starting from zero, the change will be adverse for many people".

"And for the federal budget. Rates of 5 to 6 percent would require 20 percent of tax revenues just for debt service. In 2015, interest payments on the national debt will require a sum equal to one third of income-tax revenues ($533 billion). There is excess capacity in office space (in Manhattan, square footage equivalent to 920 football fields, according to The New York Times), malls, apartments (5 million are vacant), and in shipping, etc. But the economy, dependent on government-manufactured demand, is like an athlete on performance-enhancing drugs. Writing in Barron's, Vitaliy Katsenelson compares the economy to an injured athlete who takes steroids in order to keep competing. They exaggerate the athlete's recovery and mask the pain, but require steady doses and produce dependency".

"The 1990s were the stock market's best decade since the Depression; the 2000s were the worst. The 2010s? Today, talk about a "new normal" often includes gloomy references to Japan's "lost decade" and a possible American future of protracted slow growth.
The administration, however, projects deficits three times larger than the post-1945 norm, interest rates less than one half the norm, yet growth 10 percent higher than in the booming 1980s. That is irrational exuberance. But nowadays there is no other kind".