A recent New York Times article highlighted the inadequacy of job training programs in the face of massive unemployment. The programs do not reflect the demand for highly skilled workers, such as those who can handle high-tech equipment and service jet engines. Even highly regarded programs have less than a 60 percent job placement rate. It is hard to predict the economy’s next great job-producing sectors and develop programs that train for them.

We’ve reached the point, moreover, where the experience that come with age has become a roadblock to successful job hunting, and almost 39 percent of the long-term unemployed are men in their mid-40s or older. Unemployment checks barely covers their living expenses. Sometimes families break up or people move in with their elderly parents. It’s a sad story.

When passive labor policies are not working and the end of recession seems too far away, it’s time to consider more active steps, including public employment programs. Once upon a time in America, the Civilian Conservation Corps reached out to jobless young people. Perhaps we need another large-scale jobs program, only this time for older workers. Just as the Fed is our lender of last resort, government could take on the role of employer of last resort. It’s paying the jobless anyway, in the form of unemployment insurance (about to be extended again). Why not just go ahead and give jobs along with jobless benefits?

Are you worried that such a plan will intolerably increase the public debt? A study by Carmen M. Reinhart, a co-author with Kenneth Rogoff of This Time is Different: Eight Centuries of Financial Follies, says of the Great Depression: “Countries that were more consistent in keeping spending high tended to recover more quickly.” (Free but older version of the paper is here). Perhaps there is a lesson for us in this.

In this morning’s Wall Street Journal, Princeton’s Alan Blinder suggests a way to increase fiscal stimulus, deliver aid to those who need it most and avoid increasing federal deficits–all at the same time. Here’s his plan, in his own words:

Let the upper-income tax cuts expire on schedule at year end. That would save the government an estimated $75 billion over the next two years. However, it would also diminish aggregate demand a bit. So, instead of using the $75 billion to reduce the deficit, spend it on unemployment benefits, food stamps and the like for two years. That would surely put more spending into the economy than the tax hike takes out, thus creating jobs.

How much more? Getting a numerical estimate requires the use of a quantitative model of the U.S. economy. In recent testimony before the House Budget Committee, Mark Zandi of Moody’s Analytics used his model to estimate that extending unemployment insurance benefits has almost five times as much “bang for the buck” as making the Bush tax cuts permanent.

Based on his estimates, the budgetary trade I just recommended would add almost $100 billion to aggregate demand over the next two years—without adding a dime to the deficit.

The Bureau of Labor Statistics released its monthly Employment Situation Report this morning. The headlines will announce an increase of 290,000 in nonfarm payroll employment and a jump in the unemployment rate to 9.9%. While employment grew, the labor force grew faster than usual, with 195,000 lured back into looking for work by better prospects in the job market. Even without these re-entrants, the labor force grew by 610,000 in April. So while trends are pointing in the right direction, the unemployment rate will continue to look bleak for quite awhile. continue reading…