FORUM
Why Not Bail
Out the
Unemployed?
The United States economy is shedding jobs faster than a
grooming dog sheds fleas. Payroll employment has been drop
ping for nine months in a r6*v, with 159,000 fewer jobs on the
books in September than in
Julianne
Malveaux
Guest
Columnist
the month before.
So far this year, payrolls
are down 760,000, and
969,000 in the private sector.
The unemployment rate has
held steady at 6.1 percent for
the past two months, but it is
up 1 .4 points during the past
year. Nearly 10 million people
ii..? i i
oic umtiauy unempioyeu,
which means they are officially looking for work .These numbers
do not include those who have dropped out of the labor force, in
other words people without jobs who have just stopped looking.
It also doesn't include people who are underemployed, or
working at jobs that they are overqualified for. The Bureau of
Labor Statistics develops several rates of "labor utilization,"
including one that includes peo- .
pie who work part time because
they can't find full time work,
and those "marginally
attached".
With such a measure the
unemployment rate would dou
ble to 1 1 percent. And. surprise,
surprise, African American
workers are doing much worse
than other workers in the labor
force. While the unemployment
rate was 5.4 percent for whites,
it was 1 1 .4 percent for African
Americans.
If the white unemployment
rate were 1 1 .4 percent, someone
other than this humble colum
nist would be asking about a
bailout for the unemployed. But
because we are simply looking
at a black unemployment rate,
there has been little discussion
about what to do about exces
sive unemployment.
According to the Economic Policy Institute (www.epi.org) all
of the gains African Americans made in the 1990s were wiped out
by job losses in the last several years. The report, written by
Algernon Austin, suggests that African American workers have
been among the hardest hit by our economic downturn. There's
nothing for black folks, but plenty for banks.
We saw our Congress rush to action to provide a bailout for
financial markets. It was said that it was an emergency, that we
had no choice, that the $850 (up form $700) billion bailout was a
matter of life and death for the nation's economy. Ask the person
who has been unemployed for the last six months how they feel
about life and death. Some of these folks have exhausted their
unemployment insurance. Some have lost Jheir homes and their
families.
One in five unemployed people have been unemployed for at
least six months, the highest share of long-term unemployment in
three years. Yet these people have been virtually ignored by pol
icymakers. Furthermore, the number of people who are involun
tarily part time, or who would rather woik full time, has skyrock
eted.
The number grew by 300,000 in September, and by 1 .6 mil
lion in the past year. Six million people who hold part time jobs
want and need fall time jobs, the largest number in fifteen years!
Again, we keep hearing about markets, but the focus is on every
market except the labor market.
Just about every sector ot the economy is experiencing joo
losses, from factory jobs, to service jobs, to jobs in the financial
services industry. Only in health care and government services do
jobs continue to grow. There is barely a safe haven for those who
are losing their jobs .The economic policy institute cites one piece
of legislation as providing possibilities for those at the bottom.
The Emergency Unemployment Compensation (EUC) pro
gram that extends jobless benefits an extra 13 weeks. That provi
sion has run out and can be renewed by Congress. That's the least
a group of bailout-focused lawmakers can do for ordinary people
who also need a hand. Realistically, though, lawmakers aren't
likely to do much more. They are rushing home to get involved
in a close election, and leaving the employment mess until after
November or. more likely, after January.
Yet if trends continue as they have, we will have lost at least
a million jobs this year, and we will have experienced an indiffer
ent Congress that can be whipped into fearful bailout submission
by Treasury Secretary Paulson. Who speaks for workers? And
will working people get a bailout?
When your Congressional representative comes home to
campaign, ask what they will do for workers. It's a fair question
to raise as our economy continues to spiral out of control.
Dr. Julianne Malveaux is President of Bennett College for
Women. She is also on the Board of Directors of the Economic
Policy Institute. She can be reached at presoffice? bennett.edu.
What Happened
And What Should
You Do?
For the last two weeks, I have felt more like a therapist than
a financial advisor. People are scared. Banks are failing Wall
Street firms are failing. If we're not in a recession, it sure feels
like one. Our government is telling us that if they don't spend
$700 billion to stabilize our .
credit markets, our economic
system may collapse. What is
going on? How did we get
here? What should you do 1
next?
In short, we got into this
mess because some so-called
smart people on Wall Street I
loaned a lot of monev to Deo- ?
Danny
Freeman
Guest
Columnist
pie for mortgages and too
many of these people couldn't pay the money back. On top of
that. Wall Street used these mortgages as collateral to borrow
money for themselves to invest in oil, commodities, and even
more mortgages.
I understand why folks are so upset about this bailout pack
aee.Whv should taxDavers have
V * +
to bailout greedy lenders and
Wall Street? Unfortunately, the
$700 billion bailout package
will not fix things, but merely
keep things from getting very
bad, very fast. The rock has
already been thrown into the
pond. Now, we're just waiting
to see how much damage the
ripples do when they come
ashore. ?
What should you do next?
In the midst of this crisis, many
people have sought the safety of
bank deposits as a way to pro
tect themselves against loss. I
hate to be the bearer of bad
news, but sticking your money
in the bank will not protect you
in a worst-case scenario. As
proof, consider what happened
to the Wachovia Bank.
Wachovia's initial deal to be
purchased by Citibank was a
shotgun marriage. Why did the FDIC want Wachovia to accept
this offer? Because Wachovia was on the verge of failing.
Wachovia had about $339 billion in deposits. As of the second
quarter of 2008, the FDIC had about $45 billion in its Deposit
Insurance Fund (DIF). You do the math. How can a $45 billion
insurance fund cover $339 billion in deposits? h can't. If
Wachovia had failed, a lot of people would have lost a lot of
money and they would have been surprised to leant that the FDIC
would not have been able to make them whole.
So what else should you do? First, don't panic. Hasty deci
sions rarely work in your favor. Resist the temptation to make
changes just for the sake of making changes. Doing so it a lot like
climbing a greased pole: a whole lot of motion with very little
progress. Next, re-evaluate your financial goals. Art you 20 years
away from retirement and have time to work through this mess?
Or, are you already retired and need to make sure your invest
ment income will keep up with inflation? Your financial goals
determine your investment strategy. Your investment strategy
will determine what investment products are appropriate to help
you reach your financial goals. If you manage your own money,
do your research. If you have a financial advisor, go talk to him
to make sure your portfolio matches your financial goals and tol
erance for risk.
Other countries such as Sweden, Norway, Japan, and Korea
have had to bailout their financial systems before. What history
shows is that the first one Or two years after the bailout can be
pretty rough.
Finally, remember that in the midst or cnaos, you can onen
find opportunity. Even if .the economy slows down, focns on
investing in things that people will still spend money on. Look at
consumer staples, or what I call the smoke 'em, eat 'em, and
drink 'em stocks. Look at energy, because people will still be
buying gas for their cars so that they can get back and forth to
work. Our country will still be spending a lot of money on health
care and medical services, so look at stocks in these areas. Also,
look at utilities because we will still heed to keep the lights on in
our homes.
Our financial system has been forever changed. Sticking with
conventional wisdom can be costly to yotfr long-term financial
goals, so it's time to rethink what will work. Investment strategies
usually swing to extremes. We just cane through a period of
extreme risk-taking and it blew up in Wall Street's face, hut Main
Street will be left to feel the pain. Now, we will probably go
through a period where many people win seek to avoid risk at all
costs. I recommend that you seek to find that middle groand and
investment opportunities will be there waiting for yon. Oh. and
remember what Big Mama told you: don't put all of youreggs in
one basket. 1
Winston-Salem Financial Advisor Danny Freeman it with
Darda Wealth Management, wwwdardowealth/com.
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