Structural Mass A,Structural,Conundrum

　　The United States is being plagued by unemployment. Particularly since the financial crisis, high unemployment has become one of the most pressing social problems in the country. In the current election year, it will also be one of the key factors that decide the result of the general election in November. Statistics from U.S. Department of Labor show that the country has created 69,000 more jobs this May, far lower than the expected figure of 150,000. The depressing jobs report triggered fresh anxiety for U.S. economic prospect. If the trouble of the U.S. debt issue is temporarily avoidable, the problem of unemployment is much more urgent for Washington policymakers. Paul Krugman, winner of the Nobel Prize in economics, warned recently that unemployment is now the biggest threat to the U.S. economy.
　　Noticeable features
　　Despite ongoing debate over the nature of U.S. unemployment, people are more inclined to believe that it is rooted in structural causes.
　　Although Ben Bernanke, Chairman of the U.S. Federal Reserve Board (FRB), defended his quantitative easing economic policy and repeatedly claimed the current U.S. unemployment is cyclical, his view was not unanimous among his colleagues at FRB. Jeffrey Lacker, President of the Federal Reserve Bank of Richmond (FRBR), said in May that the major factor affecting the U.S. job market is structural problems such as the lack of skilled professionals. President of the Federal Reserve Bank of Philadelphia Charles Plosser agrees that the current unemployment is mainly due to structural causes, suggesting that monetary stimulus measures by the FRB are of little use.
　　While the U.S. economy has kept a steadily low rate of growth since the second half of 2009, unemployment has stayed high. In 2011, the U.S. economy grew by 1.7 percent, down by 1.3 percentage points compared to that in 2010, while the unemployment rate in 2010 and 2011 was 9.65 percent and 8.95 percent respectively. Thus, the most important challenge facing the United States is no longer economic growth, but unemployment. The “jobless recovery” has become a major challenge for the U.S. economy.
　　The average duration of unemployment in previous economic recessions has never exceeded 26 weeks. However, since September 2009, data have shown that the average unemployment period of 45 percent of the unemployed has exceeded 27 weeks, the highest level since the end of World War II, and another sign of structural unemployment.
　　Since the slight recovery of the U.S. economy in June 2009, the job vacancy rate has risen 35 percent, while unemployment still remained obstinately high. Reports from Deloitte Consulting and National Association of Manufacturers in 2011 said that U.S. manufacturers are short of 600,000 needed technicians. Large numbers of job vacancies exist in health care and the IT industry without enough competent applicants.
　　While the service industry has seen a strong recovery in employment, employment in manufacturing and construction industries remains low. The employment in different industries is in line with the trend of U.S. industrial structure adjustment, which reflected a structural unemployment in the U.S. job market.
　　Major structural causes
　　The U.S. structural unemployment is directly related to the transformation of the U.S. economy, but it worsened in the current recession, when the United States lost 8.8 million jobs, about 42 percent of which have since been resumed.
　　De-industrialization of the real economy brought substantial job losses. From 1980 to 2009, the number of employed people in U.S. manufacturing dropped to 11.88 million from 20.29 million due to technical advancement and industry contraction.
　　Under the backdrop of globalization, the outsourcing of the country’s manufacturing industry and low-end services, which require high labor costs, has sent many U.S. job opportunities overseas. Statistics from the U.S. Department of Commerce show that in the first decade in the 21st century, top U.S. companies reduced 2.9 million jobs in the United States, while employing 2.4 million overseas.
　　The imbalanced demand and supply of the workforce in profession, skill and industry is an important structural reason for the high levels of U.S. unemployment. Laid-off workers from areas hit worst by the financial crisis such as construction, real estate, and banking have the most difficulty finding new jobs. More opportunities are found in education and health care. Many of the jobs in the new economy require workers with a rich skill set. However, the bulk of recent college graduates are not yet qualified for these jobs. Fund shortages have meanwhile prevented many enterprises from providing adequate retraining, causing an imbalance in the job market and eventually contributing to the unemployment.
　　The problem of an aging population further aggravates the U.S. structural unemployment. Though the unemployment rate of aging people in the United States is lower than the youth, it is much harder for them to find new jobs once they are laid off.
　　Another widely cited reason for U.S. unemployment is the current unemployment compensation system. In 2009, U.S. Government extended unemployment relief from 26 weeks to 99 weeks, leading some people to stay out of work intentionally. Lacker of FRBR said unemployment compensation may add 1.7 percent to the unemployment rate, which currently stands at 8.1 percent.
　　Moreover, long-term unemployment caused a permanent impact on the natural employment rate, because the long-term unemployed lose skills during long lay-offs and have an even harder time job hunting.
　　
　　Big consequences
　　The structural unemployment will become the biggest barrier to U.S. economic growth. The income of 56 percent of the longest unemployed would decline, constraining their demand. What’s more, a long spell of unemployment would make more people lose re-employment ability, dragging down the recovery of the U.S. economy.
　　Employment issues may influence the future trend of the U.S. macroeconomic and industrial policy. As it has formed the core of U.S. domestic and foreign policies, job creation has become the primary concern for almost all its new policies. Tax leverage is to be used to support industries that can create more jobs, such as green energy industries. FRB has indicated willingness to take more measures to improve the job market if necessary. Washington might also carry out strong and active trade policies to promote export and fuel employment.
　　Unemployment is the biggest challenge for President Obama’s election to a second term. Seen from U.S. history, high unemployment was usually the major factor for an incumbent president’s failure for reelec- tion. The Obama administration has gone on the attack to find a scapegoat for its pessimistic employment situation. On one hand, Washington accuses China of undervaluing its currency; on the other hand, Obama complains that the EU debt crisis might affect his reelection.
　　High unemployment also triggers social conflict in the United States. The main force of the sweeping Occupy Wall Street protest is mainly youth and unemployed, while it is rooted in lost jobs and income inequality. Though the movement never led to major change, it succeeded in calling attention to structural problems in the economy.
　　Possible settlement
　　Though growing consensus was reached on the problem, high unemployment is still a real problem for the U.S. economy. Stimulation effects of monetary policies are limited but might raise inflation. Therefore, to settle the problem, Washington must carefully consider some possible solutions.
　　The fundamental reason for the current high unemployment of the United States lies in its slow economic growth after the recession. Only strong economic growth will boost the confidence of enterprises and consumers to increase investment and expand consumption. Therefore, the principal task for Washington is to promote economic growth and guide its economy back into a virtuous circle. Only then will unemployment be eased.
　　To encourage enterprises’ reinvestment and expanding employment, tax reduction for the U.S. federal and local governments is still needed, which could also help to stimulate consumption. The 2013 fiscal year budget of the Obama administration submitted in February proposed a series of tax reduction programs. It prolonged its 2-percent payroll tax reduction policy to the end of 2012, and proposed a 10-percent tax reduction for those small enterprises which helped to create jobs or raised salaries of workers in 2012. Companies that hire domestically could also enjoy the tax preference. The measures are all aimed at accelerating employment expansion and economic recovery.
　　With the labor price rise in emerging countries, the United States began its reindustrialization strategy. The strategy might attract some U.S. enterprises to return, which will not only help to solve the “hollowing out” of U.S. industry but also contribute to creating more jobs.
　　However, the immediate prospect for solving the U.S. structural unemployment is not too bright. There is still a long way to go.