Obama's Jobs Summit Tackles Rising Unemployment

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Another benefit: more benefits.

On the heels of a November 5 extension of jobless benefits for the unemployed, Barack Obama’s upcoming jobs summit plans to look at a further extension – potentially the third since the financial crisis last year – among other potential solutions and stopgaps for the nation’s unemployed.

The official unemployment rate stands at 10.2%, and economists expect that number to hold steady when October’s numbers are released later this week.

However, the U6 unemployment number – which counts discouraged and underemployed workers – stands at an intimidating 17.5%. As the number most similar to historical methods of measuring unemployment, the U6 unemployment rate bears watching.

With the U6 unemployment rate uncomfortably approaching the Depression unemployment rate of 25%, Obama is pulling out all the stops for his jobs summit. Vaguely reminiscent of the 1907 J.P. Morgan meeting of bankers to stem market panic 100 years ago, this jobs summit will be much larger.

Obama has invited 130 leaders from economics and business – including Nobel Prize winner Paul Krugman and the CEOs of Google, FedEx, Disney, and AT&T.

“We are going to be bringing together people from all across the country… to explore how we can jumpstart the hiring that typically lags behind economic growth, but we don’t want to wait,” the President said last week. “We want to see if we can accelerate it.”

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However, not everyone believes that unemployment remains a lagging indicator in this debt cycle.

“Today’s unemployment rate is much more than a lagging indicator,” Mohamed El-Erian, CEO of PIMCO Funds, told Bloomberg last month. “It is also a signal of future pressures on consumption, housing and the country’s social safety net.”

The problem is the protracted nature of unemployment this time around. With many workers remaining out of work for extended periods of time, they present a large drag on America’s GDP – which is 70% based on consumption. Couple persistent, high unemployment with a jump in America’s savings rates and consumers paying down old debt rather than borrowing – and spending – new money, and it’s easy to see why Obama feels a jobs summit is in order.

“It’s very important for policy makers to remain very aggressive,” Mark Zandi, chief economist for Moody’sEconomy.com, told Bloomberg. “The severe stress in the job market is the most significant threat to the nascent recovery.”