The One-Fifth Element: 20% of America is Underemployed

Twenty percent of Americans lack adequate employment -- ie, are unemployed or looking for more work -- according to a new Gallup poll. Isn't that more than twice the official unemployment rate of 9.7%, you ask? Yes, but if you factor in measurements for marginally attached and discouraged workers -- combined with those nebulous seasonal adjustments from the Bureau of Labor Statistics -- you got a BLS figure very close to 20 percent, as well. There are really only two points to make about this horrible news.

1) This is why we need stimulus

Unemployed and underemployed Americans spend about 40% less per day than employed Americans, according the poll. The implications for the broader economy are fairly straightforward. Some employers asked to react to the proposed hiring tax credits in the Senate jobs bill have said they'll only start hiring when they see demand recover. You can imagine how difficult it is for private sector demand to recover when 20% of Americans are unemployed and pinching pennies. One of the reasons I continue to defend the stimulus despite its flaws is that government spending is utterly necessary to supplement weak private demand. Indeed, government spending is the only thing keeping private demand from falling off a cliff. As I wrote two weeks ago:

If you look at personal income minus government transfers -- this is a good proxy for how the private sector is doing at generating income growth without counting government assistance -- that measure has fallen by 8 percent since the recession began. But disposable personal income-- what people have the ability to actually spend, due to tax breaks and government transfer payments like unemployment insurance -- is actually up one percent.

2) This is why people are angry

Underemployed Americans have a slightly better impression of the president than the general public, according to the Gallup poll. But 20 percent underemployment is a headwind against which any ambitious domestic agenda will struggle. The instinct to blame Obama's first year travails on all things except the economy -- what Jon Chait likes to call the Wehner Fallacy -- ignores that fact that joblessness has grown significantly under Obama even as the pace of job loss has slowed significantly under him. This is not to say that the president has done a universally exceptional job of advancing his agenda; merely that he inherited an economy at the nadir of decelerating employment, and that economic conditions color Americans' attitude toward their government.

chart of the day, jobs lost in the bush and obama administrations


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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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