Kansas City — August 7, 2007 – After analyzing six years of data and holding interviews with people hit by the I.T. (information technology) bust of 2001 one theory says U.S. unemployment might be closer to 16 percent. Current formulas don’t work. The mortgage industry got into trouble because risk analysis formulas did not work for creative mortgages. I contend that unemployment formulas don’t work either. Unemployment filings don’t tell the whole story and illegal aliens will not file for unemployment.
Current unemployment calculations do not know how to compensate for illegal aliens and cash jobs. (A friend of mine, whos programming job went to India in 2001, supported his wife and children by delivering pizzas.) Many people fell off the back side of unemployment but they are still unemployed. They just don’t qualify for unemployment any more. The formulas can’t account for these people.
The problem gives rise to other problems, such a workman’s compensation fraud and disability fraud perpetrated by those who suspect their job will be outsourced. I suspect this is a very small group. With regard to mortgages and the subprime debacle I maintain that old risk analysis formulas could not and did not work with some of the creative mortgages offered by lenders. The formulas simply could not calculate the risk.
Some people turned to eBay as a source of income. In many areas eBay sales are not taxable. If the government really wants to account for everyone, and thus determine the real unemployment rate, it could be done. However, nobody wants big brother spying on them, and day laborers, illegals, Viet Nam vets and others refuse to let it happen. Life is not easy for many of the formerly-unemployed, but it was the U.S. Government that pushed for NAFTA. Corporations sent jobs to India, the Phillipines, China and Malaysia, and that had little or nothing to do with NAFTA.
American workers had to do something after the unemployment ran out. A sweeping analysis of the stock market simply says “too much money chasing after too few stocks.” What about too many Americans chasing after too few jobs? What do you think the unemployment rate really is? Young people in this country move from job to job while they are age 15-25, and few file for unemployment. After that, marriage, education and stability should become a factor. Unforseen factors, like one’s job going overseas, means the family cannot pay the mortgage and credit cards. Does that sound familiar in the summer of 2007? It looks like 2001 to me.
Granted this is an editorial piece, but if you or I interview for a job, how would we answer the question ‘What contingency plan do you have if your job went to India tomorrow?’ Don’t you think buying a home for an average price of $237,000 demands the same question? The real answer is ‘I will deliver pizzas and move in to an apartment and you can foreclose on the darned house.’
If a person is retired from the military are they unemployed? If they sell on eBay are they unemployed? What about websites with advertising, where if a visitor clicks an ad the page owner makes a little money? Is that a job or an unemployed person? Risk analysis and unemployment statistics aside, my day to day visits with real people tell me the real unemployment rate in the United States is about 16 percent and rising. Remember if you will, that Alt-A mortgages were developed for no-doc and self-employed people with unverified income.
This Op-Ed piece was produced by T. Blake. All rights reserved.