BLS is reporting widespread job loss in October of 240,000 and a jump in the unemployment rate to 6.5%. As was the case for other recent economic indicators, the forecasts were for a not-quite-as-bad outcome. As the Wall Street Journal reports, "Wall Street economists had expected a 200,000 decline in payrolls last month and only a 6.3% jobless rate, according to a Dow Jones Newswires survey."
As important, the involuntary underemployed (employed part-time because of economic conditions) jumped to 6.7 million (seasonally adjusted) -- and increase of almost 650,000. Congress is beginning to think about a new stimulus package that includes an extension of unemployment benefits. They need to also think about this silent job crisis.
Few of the proposals in the stimulus package will help the worker whose hours have been reduced. The answer to that problem is a reducing or "holiday" in payroll taxes. With a cut in the amount of withholding for payroll taxes, all workers, including part time, would get an immediate boost.
In addition, any stimulus package should include a knowledge creation tax credit - specifically a tax credit for worker training. That credit should cover not only the cost of direct cost of the training but also the wages paid to the worker while they are undergoing the training. Such a knowledge tax credit helps in a number of ways:
1) it addresses the macro economic stimulus of boosting individual spending;
2) it targets directly the problem of the involuntary underemployed (those who are part time for economic reasons), which is the hidden factor in the current slowdown;
3) it makes companies (and the economy) more competitive; and,
4) it facilitates the transition to the I-Cubed Economy.
The training tax credit would help both the unemployed and the underemployed. If companies are going to either cut back a worker's hours or lay the person off completely, wouldn't it be better to send them to the classroom instead?
UPDATE: for more on the underemployed issue, see Undercounting Under-Employment over at Barry Ritholtz's blog The Big Picture.