Mark Perry analyzes the current Bureau of Labor Statistics unemployment data is his blog, Carpe Diem, a required daily read for me.

Excerpt from Interesting Facts from Today’s Employment Report, 1/6/12:

The unemployment rate for workers with a college degree fell to 4.1% in December, which  is the lowest jobless rate for that group since January 2009, almost three years ago.   The number of employed college graduates is at an all-time high of 45.2 million, and more than 1.6 million above the December 2007 level when the recession started.  In contrast, the jobless rate for workers with less than a high school degree jumped to 13.8% in December from 13.3% in November, and the employment level for those workers remains 1.24 million jobs below the December 2007 level. This contrast suggests that educational level might be an important factor in the labor market improvements and the drop in the jobless rate to 8.5%, with college-educated workers being the group that is gaining jobs during the recovery, while the least educated workers are the group finding it hardest to find jobs.

HKO comments:

This may not be very surprising, but it does point to changes that have caused this.  Our economy has shifted from manufacturing production to information processing. Even in a modern steel mill, workers are scarce but the booth suspended in the air controlling quality and processing is governed by a worker sitting before an array of computer screens that look like the Starship Enterprise.    It could also mean that current college grads have skills that may have been comparable to high school grads a generation ago.

Control room of a modern steel mill

Modern financial giants like Google and Facebook have a fraction of the workers that such a financial base would have required during the previous industrial era.  A high school grad used to be able to get a decent job in an auto factory ora  steel mill or with a construction company.  Especially with the collapse of the housing market, construction jobs are substantially down.  Even with government supportted tech schools teaching useful trades, the demand for these are substantially down.

All of this is made much worse by a huge jump in the minimum wage that occurred when the Democrats took control of the House in 2006, just before the financial collapse.   To the extent that the mandated minimum wage is in excess of the market wage, this will show up in higher unemployment.  Reducing the minimum wage may be sound economics but it is probably politically suicidal.  We will like just have to wait until the market rate catches up to the mandated rate.

Lastly, one economist noted that each successive recession appears to have a longer period of unemployment. This may be due to the longer period of unemployment benefits.  This is magnified at some point by a period of unemployment that is so long that it makes an employer skeptical of the work ethic of the prospect.  The longer one is unemployed the more unemployable he becomes.

One little-noticed effect of an increased minimum wage is that it always increases the percentage of workers who end up earning less than the minimum wage. An employer with an annual income below $500,000 is free to ignore the federal minimum wage. The federal minimum wage does not apply to workers on small farms or at seasonal amusement or recreational facilities.  It does not apply to newspaper deliverers, companions for the elderly, outside salesmen, U.S. seamen on foreign-flag ships, or part time babysitters.  There is sure to be some outright evasion of minimum wage laws..

The Statistical Abstract of the United States shows that among 73 million workers still paid by the hour in 2003 only… 0.7% earned the minimum wage. Three times as many- 1.6 million or 2.2 percent- earned less than the minimum wage.  What happens when the minimum wage is increased is that some are priced out of a job, such as replacing supermarket clerks with self-check-out machines.  But many are simply shoved into jobs that pay even less than the minimum, legally and otherwise.

The federal minimum wage was increased to $4.75 in October 1996 and to $5.15 a year later.  What happened? The Statistical Abstract from that period shows that the percentage of workers earning less than the minimum wage jumped from 2.5 percent (1.7 million) in 1995 to 4.2 percent (3 million) by 1997.  The percentage of teens working for less than the minimum rose from 7.2 percent to 19.8 percent.  The increased minimum wage is the only plausible explanation, since unemployment was low and falling in1996-1997.  The higher minimum wage increased competition for subminimum wage jobs, pushing the lowest wages even lower. Good intentions do not always produce good results.

From Income and Wealth by Alan Reynolds

HKO comments:

It has become a common refrain in these pages to see how government policies work contrary to their intentions.   Minimum wage laws may not be seen to impact employment  immediately at the time they are enacted, but their influence on unemployment will be felt dearly when the next recession hits and the lowest paid and least experienced are the first to feel the pain. Unemployment among black teenagers is over 40%.   It just defies basic common sense to require employers to pay more for anything and not expect them seek alternatives. These minimum wage laws are definitely influencing employment numbers now, and the health insurance bill is in effect an increase in employment costs that is making it even worse.

It is also noteworthy how little analysis like this is ever carried in the broader media.

Obama has already announced plans to increase the maximum tax rate to 40% for those who make over $250k. He has also proposed elimination of the ceiling on social security taxes and now the health care bill adds a tax on employers who do not provide health insurance. If you combine this basket of tax hikes with the hikes in taxes from states like California and New York  to avoid their own meltdown and you have a substantial change in the taxes levied on small business owners.  Add  substantially higher minimum wages, enacted long ago but now taking effect in the most severe recession in decades, and higher proposed capital gains taxes. And then consider the vast uncertainty of the Rube Goldberg system called Cap and Trade and the impact of some version of the strongly pro union card check bill will have on business thinking.

You have to be an economic moron not to understand that this will sharply curtail economic growth, investment and hiring. Any of these changes would have an impact, but the collection of such disincentives has a staggering impact on the decisions of small businesses.

Those who are able will shut down and just retire early even if they have to reduce their lifestyle to do so. I hear this from small business people consistently.  With the last kids off to college they speak of selling their business and moving to their beach house.

These same business people see their risk reward opportunity to be so poor now that they would rather sit on their money in low yield money funds that risk it in expansion only to see 70% of it taxed away IF they are successful. That is why there is over 3.5 TRILLION dollars sitting in money market funds.

Many will adjust to the new looter mentality and do the best that they can. I am sure that lawyers and accounting advisors will seek and finds loopholes and other non productive means to protect private wealth. Those who are sophisticated enough will seek foreign opportunities.

Unless this direction is changed unemployment will soar and economic growth will stagnate for a long time.