Mohamed A. El-Erian
Mohamed A. El-Erian is CEO and co-CIO of PIMCO, and author of When Markets Collide.
NEWPORT BEACH – It was relegated to the Q&A session, rather than featured prominently in the opening statement, at last week’s first-ever press conference of US Federal Reserve Board Chairman Ben Bernanke. It is an issue that too many in Washington, DC are willing to dismiss as “transitory,” despite visible evidence to the contrary. It is extremely vulnerable to high oil and food prices. And it undermines the operational assumptions that underpin the long-standing characterization of the US economy as vibrant and responsive.
The issue is the scope and composition of unemployment in America – a problem that is yet to be sufficiently recognized for its increasingly detrimental impact on the country’s social fabric, its economic potential, and its already-fragile fiscal position and debt dynamics.
Let us start with the facts:
· At 8.8% almost three years after the onset of the global financial crisis, America’s unemployment rate remains stubbornly (and unusually) high;
· Rather than reflecting job creation, much of the improvement in recent months (from 9.8% in November last year) is due to workers exiting the labor force, thus driving workforce participation to a multi-year low of 64.2%;
· If part-time workers eager to work full time are included, almost one in six workers in America are either under- or unemployed;
· More than six million workers have been unemployed for more than six months, and four million for over a year;
· Unemployment among 16-19 year olds is at a staggering 24%;