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The Musical-Chairs Economy

Unemployment is low, yet there's unease about jobs. When the music stops, who will have a seat?

Here's the question for today: If the unemployment rate is only 4.4%, why do we all feel so dang nervous about our jobs? Americans are suffering from a massive case of cognitive dissonance. The stream of data coming out of the Bureau of Labor Statistics paint a rosy picture of the labor market today.

Take that aforementioned 4.4%, which represents the share of the civilian labor force that was out of work in the second week of October—that's the same level of unemployment we saw in late 1998 and early 1999, the halcyon days of the New Economy boom. For example, in February, 1999, when the tech job market was revving up in earnest, the unemployment rate was 4.4%, just what it is today.

Some groups are doing even better today than they did during most of the boom, at least judging by their rate of unemployment. For example, if you're between the ages of 35 and 44, the BLS calculates that your odds of being unemployed in October, 2006, were only 2.9%. By comparison, in February, 1999, the unemployment rate for people in that age group was 3.2%.

No One Gets Credit

But it just doesn't feel that good. The Conference Board, as part of their monthly consumer-confidence survey, asks people their opinions about whether jobs are easy or hard to get. In February, 1999, 48% of respondents thought that jobs were "plentiful." Today, only 26% of people think that's the case.

And while jobs weren't a major issue in the election in most areas of the country, there was a sense of economic insecurity lurking in the background. Republican candidates who tried to run on an "economic prosperity" platform found that they couldn't get any political traction.

For example, Katherine Harris, a Florida Republican, fell badly short in her bid for the Senate. Apparently, she was unable to take advantage of the fact that the state's unemployment rate is a stunning 3.2%, very close to its all-time low.

Not How Many, How Long

There is a way, though, to reconcile low unemployment with high insecurity. Your chances of being out of work are determined by a combination of two forces: whether you lose your job, and then the length of time that it will take for you to find a new job.

It's a fact that it takes longer to find a new job today than it did in the late 1990s. Today, an unemployed worker has been out of a job for an average of 16.5 weeks. In February, 1999, the comparable figure was 13.8 weeks. What's more, companies seem to be creating fewer jobs by opening new offices or factories, or expanding existing ones, according to BLS data.

What we have is a musical-chairs economy. Most of us have a place, at least for now, so the unemployment rate is low. But as chairs—jobs—are removed, it takes a long time to find a new one. What's worse, even the safely employed are afraid of being the one left standing when the music stops.

Mandel is chief economist for BusinessWeek .

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