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The Right Word for the Unemployment Situation is "Awful"

When economists roll out euphemisms to describe the unemployment situation, you know things must be bad. Don't be fooled by adjectives like "soft" -- the unemployment situation is awful, with little sign of a significant turnaround.

Note to editors as well: "Unemployment Rate Falls to 9.7 Percent" is the wrong headline on unemployment for today. "Private Sector Fails to Create Jobs" would be on target. "What should we do about it?" would be the logical follow-up question. But don't expect that to pop up. The United States added 431,000 jobs last month, but a whopping 411,000 of them came from hiring for the decennial census. Private-sector employment grew a negligible 41,000. The only reason the rate went down was that more people quit looking for work and the labor force shrank. Since the economy needs to create about 110,000 jobs to keep up with young entrants into the economy, May was a month of moving backwards,

For even more, it was a time of unproductive idleness evocative of Depression-era forced loafing. Ben Shahn, a gifted artist of the era, captured the mood nicely with his mural of three unemployed men. They are in the Sunday best, one even with sleeves rolled up and ready to go. But there is nowhere to go.

Ah, but at least those census workers do have someplace to go each day, right? Well, sort of. As it happens my mother is working on the census, and based on this admittedly anecdotal evidence, there's nothing in that kind of work that would give you hope for your financial future. It's temporary work, and the possibility that you might work on the 2020 census is just not hope enough. Do you really think that census workers are spending freely like we hope the newly employed do? Don't bet on it. At best, you can call the census a fortuitously timed bit of stimulus.

Manufacturing has been one bright spot over the last few months, but here you have to read some tea leaves. As Daniel Meckstroth, chief economist for Manufacturers Alliance/MAPI, a trade group, pointed out this week, "The supply chain pipeline is filling with orders and manufacturing firms are reluctantly, but out of necessity, adding staff." That reflects a bounce-back of world trade after a terrible 2009, and the weaker dollar. But thanks to the Europe crisis and China's pegged currency -- where is that new flexibility in the exchange rate that was the talk of two months ago? -- the dollar is now strengthening. So much for exports.

So, what should we do about it?

It's helpful to know that Fed chairman Ben Bernanke is still publicly worrying about unemployment, and to his credit he is pushing the issue of credit to small businesses even though the major small business association is reluctant to do so.

One particularly difficult issue is the continued high rate of unemployment. High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole. I raise this issue here because healthy small businesses, including start-ups as well as going concerns, are crucial to creating jobs and improving employment security.I raise this issue here because healthy small businesses, including start-ups as well as going concerns, are crucial to creating jobs and improving employment security.
That probably means that the cheap money for "an extended period" really means just that, and any economists betting on the Fed tightening earlier rather (there are a few) than later should catch their breath. The Fed is doing the right thing.

And the federal government? It would help if Congress passed what is de facto a mini-stimulus package, mainly consisting of assistance to the states. But that is being whittled down by members who are fretting about deficits -- so far a misplaced worry for 2010.

We're living an odd disconnect right now. Employment used to be the barometer by which we measured economic progress. We're hearing a lot about equity markets. We do, of course, hear about economic growth as measured by GDP. But real action on unemployment?

That is the missing piece of the policy puzzle right now.