Jeff Seymour is a CFP, engineer, and investment advisor. His practice – Triangle Wealth Management – does financial planning and investment management on a fee-only fiduciary basis. His research focuses on global macroeconomic data.
The recent headline was: 9.1 percent unemployment, 0 new jobs. That’s a lousy jobs report. But let’s dig a little deeper.
At left is a graph of the average number of weeks that U.S. workers have claimed unemployment benefits since 1948, according to Bureau of Labor Statistics data.
Clearly, our economy is experiencing something different than at any other time since World War II. I maintain we’re working our way through a balance-sheet recession that began in 2008 and will not end until 2015 at the earliest.
Balance-sheet recessions are rare but painful recessions. This is only the second one the U.S. has ever experienced. The first balance-sheet recession was the Great Depression. They are unique in that demand for goods and services collapse regardless of lowered prices, interest rates and taxes. This is because unlike a run-of-the-mill business cycle recession, when consumers don’t see their largest assets (house, 401k) decline significantly, they do in a balance-sheet recession.
A month with zero new jobs does not mean we’re treading water. Because of population growth, the U.S. economy needs to generate approximately 125,000 new jobs per month, so no new jobs is moving backward. Let me illustrate that problem on a larger scale. We have the same number of jobs now as we did in year 2000, but there are 30 million more Americans. We’d need 18 million more jobs to return to the same proportion of people with jobs as we had in year 2000 (the good old days).
Here’s a look inside the latest BLS jobs report (for August 2011):
- InIitial claims unemployment (called the U3 rate by the BLS) remained at 9.1 percent.
- The broader U6 rate jumped to 16.2 percent.
- 14 million are unemployed. Of thoses, 43 percent – 6 million – have been unemployed over 27 weeks.
- The average duration of unemployment hit an all-time high.
- 8.8 million are working part time, but want full-time work.
- 2.6 million are marginally attached. They want work, but are not counted in the labor force since they’ve stopped looking.
- A total of 25.4 million Americans are unemployed or underemployed.
I’m sorry to write that many of these people will take years to find a new job. Even if our economy was miraculously able to generate jobs at the fastest sustained pace it ever has, (about 300,000 jobs/ month), it would be years before we would see a 5 percent unemployment rate again. And that’s with a booming economy and expanding credit.
There’s zero chance of that anytime soon.
It took three decades to paint ourselves into this corner via an explosion of debt. Granted, the past 11 years really picked up the pace because of monetary and fiscal policy that can best be described as counterproductive, irresponsible and myopic. In any case, though, that party is over. It’s time to clear up the mess and pay the bill.
Get the latest news alerts: Follow WRAL Tech Wire at Twitter.