White-Collar Blues in a ‘Jobless Recovery’

Economy’s Doldrums Hit Middle-Class Professionals Hard

By Daniel Treiman

Published May 30, 2003, issue of May 30, 2003.
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The recession that officially began in March 2001 ended within a year after it started, most economists agree. You would not know it, however, from the masses of job seekers — often solidly upper middle-class — still lining up for the services of the nation’s Jewish vocational agencies.

Even as the American economy has seen steady if modest growth, unemployment rates have continued to rise. The trend has led many to label the past year and a half of slow economic growth a “jobless recovery.”

The latest national employment figures, released earlier this month by the Bureau of Labor Statistics, provide little solace for the jobless. In April, the national unemployment rate inched up to 6%. The unemployed currently number almost 8.8 million, more than at any time since 1993.

Observers say the downturn that began in 2001 has hit college-educated, middle-class professionals harder than previous recessions. Some Jewish vocational agencies reported a tripling in the numbers of Jewish professionals and managers coming to them for help finding jobs since the beginning of the recession.

“We particularly have seen the increase… in the Jewish community… [among] people with good resumes, good education, good work experience,” said Gail Magaliff, chief operating officer for human services at FEGS Health and Human Services System, a beneficiary of the UJA-Federation of New York.

The New York metropolitan area has been hit particularly hard by the downturn, with the combination of the tanking stock market, the dot-com bust and the September 11 terrorist attacks contributing to an unemployment rate that stood at 7.9% in March, according to the Bureau of Labor Statistics.

Economists are quick to note that, while the ranks of unemployed, college-educated managers and professionals have undeniably swelled, they are far from the hardest-hit sectors of the labor force. “Recessions are always toughest on the least advantaged, and that’s the case this time as well as any other,” said Jared Bernstein, senior economist at the Economic Policy Institute, a labor-affiliated think tank in Washington.

In fact, managers and professionals and those with at least a bachelor’s degree are far less likely to be unemployed than are other workers, just as they were before the recession. The rate of unemployment for these groups, currently around 3%, is half the overall national rate.

But although this rate is lower, it has grown disproportionally. While the overall national rate of unemployment has increased by one half since April 2001, from 4% to 6%, the number of unemployed professionals and managers and jobless workers with a college degree has roughly doubled in the same period.

Moreover, long-term unemployment — 1.9 million people have been out of work for 6 months or longer, just shy of the December 2002 level, which was the highest since 1993 — is particularly acute among unemployed managers and professionals. The median duration of joblessness for unemployed managers, professionals and related occupations currently stands at 14 weeks and the mean at 23.8 weeks, both longer than for any equivalent occupational category.

Those numbers mean that the proportion of the unemployed who are managers and professionals is increasing. According to a recent study by Hofstra University economist Irwin Kellner, cited in The New York Times, managers and professionals currently constitute 17% of the unemployed, up from 13% three years ago and 9.5% during the recession of the early 1990s.

“The seeds of this downturn were placed in the sectors that disproportionately employ more highly skilled white-collar workers,” said Bernstein. He cited the information technology industry, as well as financial and business services.

This recession and the one of the early 1990s “have had a white-collar tinge that earlier recessions didn’t have,” Bernstein said. “They were in some senses milder — unemployment didn’t go as high, and the GDP didn’t fall as low — but they were much more broadly felt.”

President Bush cited the April unemployment statistics as evidence of the need to stimulate the economy with at least $550 billion in tax cuts. Congress approved a plan last week that cut taxes by a more modest $350 billion over 10 years, including a reduction in the tax on stock dividends. The vote in both chambers followed largely partisan lines, with Republicans supporting the cuts.

Critics questioned whether the tax cuts will actually stimulate the economy — and in particular criticized the president’s attempt to sell long-term tax cuts as an immediate job-creation package. Some warned that the cuts will lead to vastly increased federal budget deficits, requiring massive government borrowing that will suck money out of the economy, boost interest rates and dry up sources of investment capital needed to fuel economic growth.

“The tax cuts — both in 2001 and the current ones — are almost designed to minimize the bang for the buck, where here the ‘bang’ is how much stimulus they give to the economy at a time when it’s weak and we need it, and the ‘buck’ is what the long-term costs are going to be,” said Harvard University economist Jeffrey Frankel, a member of the Council of Economic Advisers during the Clinton administration.

Even Federal Reserve Board Chairman Alan Greenspan, who has offered a generally positive assessment of the economic recovery and was recently reappointed by Bush for a fifth term, warned last month in testimony before Congress that tax cuts that enlarge the deficit could harm the economy.

Bernstein, however, has an additional worry: that the economy will continue to grow and yield productivity increases, without generating new jobs. “The danger is that you can actually creep along this way for quite a while,” he said.

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