[EDITORIALS]Look to the Longer-Term EconomyWe saw reports Wednesday that joblessness in June was at the lowest level since the financial crisis of 1997 and 1998. After we suffered through the massive downsizing and brutal layoffs immediately following the crisis, the 3.3 percent unemployment rate for June should have been a cause for dramatic rejoicing. But there is something unsettling about low unemployment coinciding with an economic slowdown, which also marks our economy.
A closer look at the National Statistical Office data reveals that the low unemployment in June was not exactly due to improving business conditions and more people finding work. It is rather a result of more people dropping out of the economically active population; they have stopped looking for jobs. The rate of joblessness was down in June, but there were 31,000 fewer people who had jobs and a whopping 100,000 more in the number of economically inactive people.
The data could mean two things. First there appears to be a decline in frictional unemployment, or joblessness by people who are between jobs or just entering the labor market. Restructuring coupled with the economic slump means that people cannot afford to be picky about finding the right job. The 7 percent decline, to 587,000, in the number of people who were out of jobs for less than a year would support this interpretation.
The other point is the greater possibility of an increase in structural unemployment because the slump is dragging on and the industrial structure is changing. More unemployed people may find it nearly impossible to find new jobs, and give up trying. This is supported by the increase in the economically inactive population.
We caution against the careless conclusion that the June numbers mean economic stimulus is needed. Under these conditions, it is always tempting to use stimulus policies, and the government has tried more than once to create jobs by loosening its purse strings. The government may try it again, if the "limited stimulus measures" it recently announced incorporate short-term temporary job creation measures.
But this policy cannot succeed in the long run. When structural unemployment is the problem, restructuring is the answer. The correct strategy is to work on the fundamentals that will raise our growth potential and make the economy globally competitive.