The New Joblessness.

The U.S. economy is not only shedding jobs at a record rate; it is shedding more jobs than it is supposed to. It’s bad enough that the unemployment rate has doubled in only a year and a half and one out of six construction workers is out of work. By Roger Lowenstein From The New York Times Magazine.

What truly troubles President Obama’s economic advisers is that, even adjusting for the recession, the contraction in employment seems way too high. As one administration official said, “This has been a very steep job loss.” One proof, he added, is that the country is deviating from the standard (among economists) jobs predictor known as Okun’s Law.

In the 1960s, Arthur Okun, a prominent economist, claimed to have discovered a mathematical relationship between the decline in output (that is, goods and services produced) and the rise in unemployment. It held up pretty well until recently. But this time around, although the decline in output would have predicted a rise in unemployment to 8 percent, the actual jobless rate has soared to 9.5 percent. So this recession is killing off jobs even faster than the things — like automobiles, houses, computers and newspapers — that jobholders produce.

The Federal Reserve now expects unemployment to surpass 10 percent (the postwar high was 10.8 percent in 1982). By almost every other measure, ours is already the worst job environment since the Great Depression. The economy has shed 6.5 million jobs — nearly 5 percent of the total, far outstripping the 3 percent that were lost in the early ’80s. Economists fear that even when the economy turns around, the job market will be stagnant. Keith Hall, the commissioner of the Bureau of Labor Statistics, sums it up as “an ugly picture out there.”

Explanations for the collapse of the great American job machine begin with the marked absence of what is called labor hoarding. Usually during recessions, firms keep most of their employees on the payroll even as business slows, in effect stockpiling them for better days. In the current downturn, hoarding seems to have gone into reverse. Not only are firms laying off redundant workers, but they seem to be cutting into the bone. Hall says the absence of hoarding means that firms do not expect business to pick up soon. This is supported by other evidence, like a doubling in the number of involuntary part-time workers (there are nine million of them) and the shrinking workweek, now 33 hours — the shortest ever recorded. Presumably, before companies start to rehire laid-off workers, they will ask their current employees to work more.

Those who hope for a rebound argue that employers, frightened by the financial shocks and the credit crisis of last fall, effectively panicked. That is, they cut deeper than necessary. And that may be.

But layoffs are only part of the story. The problem isn’t just that so many workers have received pink slips but also that companies are failing to hire. And this, unfortunately, has been a trend for most of the past decade (unnoticed, perhaps, because the mortgage bubble was papering over latent weaknesses). At the end of the Clinton era, which also marked the end of a decade-long boom, companies that were opening or expanding operations added nearly 8 workers for every 100 already on the payroll. During the recession of 2001, the figure dropped to 7 per 100: optimistic firms were a bit less optimistic. The surprising fact is that when the recession ended, the percentage stayed at 7. “We never got our groove back,” asserts Mark Zandi of Moody’s Economy.com. In the current recession, the rate has fallen to 6 per 100.

It’s hard to give a definitive explanation for this trend, but among the reasons are a decline in innovation in the aftermath of the tech boom, leading to fewer new businesses, and the aging of the population. More people have dropped out of the work force, and a smaller work force tends to dampen job totals. The percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now. Some of those dropouts are retirees, but some may be responding to the economy’s declining dynamism. Traditionally, it was a mark of Americans’ resiliency that, when times were tough, they relocated from state to state and region to region. Now, according to the Census Bureau, mobility is at an all-time recorded low. Perhaps people with underwater mortgages cannot afford to move. Perhaps the areas they used to move to, typically the Sun Belt, are too devastated by foreclosures. But the vaunted ability of the U.S. economy to renew itself seems a little tarnished. Maybe it’s no accident that this time around, folks on the unemployment line are staying there longer.

In terms of its impact on society, a dearth of hiring is far more troubling than an excess of layoffs. Job losses have to end sooner or later. Even if they persist (as, say, in the auto industry), the government can intervene. But the government cannot force firms to hire. Ultimately, each new job depends on the boss’s belief — or hope — that sufficient work will materialize. It’s a bit of black magic also described as confidence. Over the years, it is why America has not only attracted immigrants (whose arrivals are now slowing) but also generated more opportunities and — favorite word of politicians — hope for those born here.

The administration’s tilt toward so-called sustainable new jobs, in green energy and such, shows that it understands what is at stake, both for the country and for its political fortunes. Whether its plans will bear fruit is, of course, another matter. Along with double-digit unemployment, the country is facing a second potential scare headline: falling wages. Even during recessions, businesses don’t like to lower pay, because it reduces morale. But layoffs are also a downer. And in this recession, employers ranging from the State of California to publishers (including this newspaper) have cut back on pay. In effect, job losses have been so severe that businesses have been forced to spread the pain. In June, overall wage growth was zero. Zandi thinks the United States could see negative wage growth.

How would Obama, not to mention Congress, respond to declining employment and falling wages? The pressure for another stimulus (and greater deficits) would be intense. So would that for demagogic solutions like trade barriers. Robert Reich, the former labor secretary, says most lost jobs are not coming back. The huge question is when — or whether — new ones will take their place. Roger Lowenstein, an outside director of the Sequoia Fund, is a contributing writer for the magazine.

The Joy of Sachs — By Paul Krugman.

From the NY Times. The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?

First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.

Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.

Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.

Let’s start by talking about how Goldman makes money.

Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.

Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.

And Wall Streeters have every incentive to keep playing that kind of game.

The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.

And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.

I won’t try to parse the competing claims about how much direct benefit Goldman received from recent financial bailouts, especially the government’s assumption of A.I.G.’s liabilities. What’s clear is that Wall Street in general, Goldman very much included, benefited hugely from the government’s provision of a financial backstop — an assurance that it will rescue major financial players whenever things go wrong.

You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.

Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.

If these lobbying efforts succeed, we’ll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers’ money — except that it would involve the financial industry as a whole.

The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else.

Resume Writing Tips for CEOs.

Baby boomers who’ve enjoyed an uninterrupted string of successes, and have been laid off, are struggling to recapture the magic. By Michael Winerip, a staff reporter at The New York Times.

Greg Sam, 50, has always been a rising corporate star. In his most recent job, as a vice president for Millipore, a company that services the pharmaceutical and biotech industries, Mr. Sam built a quality-oversight program from scratch into a staff of 350 working worldwide, from the corporate headquarters in Billerica, Mass., to offices in China, Japan, Ireland and France.

For this, he earned a mid-six-figure income and traveled the globe, making two dozen business trips a year. At Millipore’s 50th anniversary celebration in Puerto Rico, Mr. Sam delivered the keynote speech in Spanish. In France, he sometimes conducted business in French.

In fact, Mr. Sam was so good at what he did, he was fired.

“He came in, built us a global quality assurance program, but now that it’s in place, we don’t need a person of his skills and caliber to continue running it,” said Dr. Martin D. Madaus, the president of Millipore, who fired Mr. Sam during a round of 200 layoffs in December. “Someone with lesser expertise can do the job, because Greg essentially did such a good job.”

As Dr. Madaus explained when he visited Mr. Sam’s office to deliver the bad news, it was nothing personal. But because Mr. Sam was so highly valued until he was fired, Millipore added about $40,000 to his severance package for job placement services.

“The higher up you are,” said Dr. Madaus, whose company employs 6,000, “the longer it takes to find a new job.”

For three months, instead of going to work, Mr. Sam has come to a handsome fifth-floor office in a renovated warehouse overlooking Boston Harbor that is the headquarters of New Directions, a top-of-the-line job-search firm. As its literature says, New Directions specializes in helping unemployed “C.E.O.’s, C.O.O.’s, C.F.O.’s, C.I.O.’s” find their way back up the corporate ladder.

Situated in the heart of Boston with beautiful views; staffed by friendly professionals with advanced degrees; stocked with plenty of fresh-brewed coffee and free lunches; offering glassed-in offices for making calls, New Directions feels like an exclusive corporate retreat — except that the participants have lost their corporations.

Like Mr. Sam, most of the 85 current clients are baby boomers who’ve enjoyed an uninterrupted string of successes that have seemed almost magical, but now, in very bad times, they are struggling to recapture the magic.

Mark Gorham, a Harvard Business School grad and a former Hewlett-Packard vice president, has been unemployed for six months. At first, he said: “I sat around thinking someone will realize how great I am and call me out of the blue. Next, I figured, I’ll throw out my great résumé to search firms and someone will come knocking.”

Now he’s learning networking from Jeffrey Redmond, his personal job coach.

“Mark grew up in an age when being understated about yourself was valued,” said Mr. Redmond, a partner who has been at New Directions since its founding 23 years ago. “At 53, he has to learn to tell his story and, like a marching band, toot his own horn.”

Mr. Gorham is looking for a job using his management skills in the renewable-energy field.

“We try to work on it a little every day,” Mr. Redmond said. “Three contacts today, three tomorrow. At the end of month we have 60 people thinking about this guy who can bring all this knowledge to a growing industry.”

Mr. Gorham dreaded his first networking call in January. For weeks, he and Mr. Redmond rehearsed.

“Like a lot of senior executives, Mark was used to going on and on,” Mr. Redmond said. “He used to give speeches to thousands of people. When there was quiet, he was the one filling in the air.”

They practiced answering questions in 45 seconds.

“Jeff told me I could just talk 40 percent of the time,” Mr. Gorham said.

Mr. Redmond had him write a one-page script.

“We rehearsed to get it shorter,” Mr. Redmond said.

“Before calling,” Mr. Gorham said, “I must have rehearsed five more times at my office at home.”

THAT first call was to a colleague he hadn’t spoken with in eight years.

“I knew he’d be nice,” Mr. Gorham said. “We weren’t supposed to pick the toughest one for our first call. It went a hundred times better than I thought it would. Part of the dread was saying I didn’t have a job. I’ve never not had one. But I realized, I wasn’t calling to say, ‘Hey can you hire me.’ I basically was letting him know what’s going on and getting his advice on my plan. He was very engaged and threw out a bunch of ideas. He said, ‘Let’s get back together.’ Afterward I wondered why was I so worried.”

Mr. Redmond said in its 23 years, New Directions has served 2,400 executives and, typically, they find new positions in seven to nine months, although in a recession that could be a year.

If it is a year, Mr. Sam said his severance will cover him, but after that he would have to dip into savings.

“My frame of mind is realistic, a bit anxious,” he said. “Last night I sat with my wife and we looked at our finances. My philosophy is, be aware of it, manage it, but don’t get obsessed by it — that’s not doing myself or family any good.”

ON a recent Tuesday, Mr. Sam sat in on a seminar about LinkedIn, the online business network. Many of the men attending were dressed as they had for work, in jackets and ties. Though sitting in a room full of such bright, urbane unemployed people could be worrisome, Mr. Sam found it calming.

“When you’re at home,” he said, “you feel you’re the only one.”

He spent six hours at New Directions that day. He had his weekly meeting with his job coach, who gave him tips on cutting his résumé from five pages to three. (Too many bulleted lines like: “Performed due diligence on M & A targets and developed integration plans to extract value and support growth.”)

He met with the New Directions research director, Claire Burday, and asked her to do a search for Food and Drug Administration-regulated companies with sales over $10 million that had offices within 30 miles of places where he would like to live, including his home in Andover, Mass., and his cabin in Vermont.

He spoke with the staff psychologist, Dr. William Winn, who’d given him a battery of tests, and for several hours interviewed him to make sure he was suited for the jobs he’s seeking.

Dr. Winn concluded that it wouldn’t be wise for Mr. Sam to take a position that would focus solely on what’s wrong with a company. Mr. Sam is a builder who needs to be involved in fixing what’s wrong, Dr. Winn noted.

Indeed, asked what he missed about his old job, Mr. Sam said, “There was still plenty of opportunity to improve the company.”

Later, sitting in one of those glassed-in offices, a mob of gulls hovering outside his window, Mr. Sam checked his BlackBerry.

“A call last night from Millipore,” he said softly. “More layoffs. Two directors who worked for me were let go.”