The Unemployment Dilemma
By Barry Ritholtz - October 5th, 2009, 12:00PM
The last recession recovery cycle was notable for how poor it was in terms of recovering jobs lost int he contraction.
This cycle is already looking to surpass the prior one: Not only in the degree of lost jobs, but in terms of long term unemployment, and how long it will take to recover these jobs.
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Historical Long Term Unemployment
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Long Term Unemployment, Current Cycle
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Projected Unemployment Recovery to Peak Employment
October 5th, 2009 at 12:19 pm
I think recovery is a strong and inappropriate term to describe what happened in early 2000 and what is expected to occur this go-around.
October 5th, 2009 at 12:35 pm
You need one with demographics as well to give the complete picture
October 5th, 2009 at 12:38 pm
The Historical Long Term Unemployment chart would be interesting to see in percentage of population rather than numbers of unemployed.
October 5th, 2009 at 12:52 pm
This is still the chart that bodes most ill:
http://1.bp.blogspot.com/_pMscxxELHEg/SsdKai2JmWI/AAAAAAAAGgM/69Fd8pPGr0s/s1600-h/2007Revised.jpg
This is CR’s unemployment relative to peak employment chart with the BLS revisions in the dotted line.
The easy, and frightening lesson is since WWII, the recoveries are more and more prolonged….
October 5th, 2009 at 12:59 pm
If the nonfarm payroll numbers don’t improve very significantly by October of next year, the Dems will take a big hit in the House.
October 5th, 2009 at 1:00 pm
So basically, as we’ve cut the social safety net to the bone beginning in 1981 under Ronald Reagan, the average American has increasingly taken it in the shorts.
“Get government off my back!” doesn’t seemed to have served America well over the last 30 years.
October 5th, 2009 at 1:02 pm
gee, considering the carnage, maybe it wasn’t, merely, stupidity and unbridled arrogance..
Hon. Marjorie S. Holt of Maryland
In the House of Representatives
January 19, 1976, page 240
“Mrs. Holt. Mr. Speaker, many of us recently received a letter from the World Affairs Council of Philadelphia, inviting Members of Congress to participate in a ceremonial signing of “A Declaration of Interdependence” on January 30 in Congress Hall, adjacent to Independence Hall in Philadelphia. A number of Members of Congress have been invited to sign this document, lending their prestige to its theme, but I want the record to show my strong opposition to this declaration.
“It calls for surrender of our national sovereignty to international organizations. It declares that our economy should be regulated by international authorities. It proposes that we enter a “new world order” that would redistribute the wealth created by the American people. Mr. Speaker, this is an obscenity that defiles our Declaration of Independence, signed 200 years ago in Philadelphia. We fought a great Revolution for independence and individual liberty, but now it proposed that we participate in a world soci@list order.
“Are we a proud and free people, or are we a carcass to be picked by the jackals of the world, who want to destroy us? When one cuts through the high-flown rhetoric of this “Declaration of Interdependence,” one finds key phrases that tell the story. For example, it states:
“The economy of all nations is a seamless web, and that no one nation can any longer effectively maintain its processes of production and monetary systems without recognizing the necessity for collaborative regulation by international authorities.”
“How do you like the idea of “international authorities” controlling our production and monetary system, Mr. Speaker? How could any American dedicated to our national independence and freedom tolerate such an idea? The declaration goes on to urge a strengthening of the United Nations and a broadening of the jurisdiction of the World Court, “that these may preside over a reign of law that will not only end wars but end as well the mindless violence which terrorizes our society even in times of peace. Examine this closely. It suggests that world government will somehow cure the problems of crime and terrorism, not just the problem of war. Quite obviously, the sponsors of this declaration have lost all contact with reality
“Mr. Speaker, we have lately witnessed the United Nations organization in full cry against America and her allies of the Free World. We have watched the UN become an instrument of the Soviet Union and its shabby following of despots, large and small. America should never subject her fate to decisions by such an assembly, unless we long for national suicide. Instead, we have independence and freedom.”
http://www.newswithviews.com/Devvy/kidd471.htm
~~
“The International Monetary Fund took on a bigger global role Sunday as its 186 member nations accepted the mantle of guiding a lasting economic recovery from the 20 largest economies.
The IMF’s steering committee endorsed the Group of 20 summit plan for sustainable growth after the worst economic crisis in decades, including an increase in voting rights of at least five percent for under-represented countries.
At their Pittsburgh summit a little more than a week ago, the G20 largest rich and emerging-market economies, asked the IMF to help them shape a robust global economy and reform the fragile financial system.
The International Monetary and Financial Committee (IMFC), representing all members, backed the plan at a meeting in Istanbul ahead of the annual meetings of the IMF and World Bank that open Tuesday.
The panel vowed to maintain stimulus support of growth “until a durable recovery is secured” and take further steps as needed “to revive credit, recover lost jobs, and reverse setbacks in poverty reduction.”
…
http://rawstory.com/2009/10/imf-chief-hails-new-era-of-collaborative-global-governance/
October 5th, 2009 at 1:06 pm
Not a pretty picture. I wonder if it will be even worse, considering the projection of adding 300K beginning Spring 2010 is wildy optimistic.
October 5th, 2009 at 1:24 pm
it was, of course, merely, stupidity and unchecked arrogance that led us here..
Hon. Marjorie S. Holt of Maryland
In the House of Representatives
January 19, 1976, page 240
“Mrs. Holt. Mr. Speaker, many of us recently received a letter from the World Affairs Council of Philadelphia, inviting Members of Congress to participate in a ceremonial signing of “A Declaration of Interdependence” on January 30 in Congress Hall, adjacent to Independence Hall in Philadelphia. A number of Members of Congress have been invited to sign this document, lending their prestige to its theme, but I want the record to show my strong opposition to this declaration.
“It calls for surrender of our national sovereignty to international organizations. It declares that our economy should be regulated by international authorities. It proposes that we enter a “new world order” that would redistribute the wealth created by the American people. Mr. Speaker, this is an obscenity that defiles our Declaration of Independence, signed 200 years ago in Philadelphia. We fought a great Revolution for independence and individual liberty, but now it proposed that we participate in a world socialist order.
“Are we a proud and free people, or are we a carcass to be picked by the jackals of the world, who want to destroy us? When one cuts through the high-flown rhetoric of this “Declaration of Interdependence,” one finds key phrases that tell the story. For example, it states:
“The economy of all nations is a seamless web, and that no one nation can any longer effectively maintain its processes of production and monetary systems without recognizing the necessity for collaborative regulation by international authorities.”
“How do you like the idea of “international authorities” controlling our production and monetary system, Mr. Speaker? How could any American dedicated to our national independence and freedom tolerate such an idea? The declaration goes on to urge a strengthening of the United Nations and a broadening of the jurisdiction of the World Court, “that these may preside over a reign of law that will not only end wars but end as well the mindless violence which terrorizes our society even in times of peace. Examine this closely. It suggests that world government will somehow cure the problems of crime and terrorism, not just the problem of war. Quite obviously, the sponsors of this declaration have lost all contact with reality
“Mr. Speaker, we have lately witnessed the United Nations organization in full cry against America and her allies of the Free World. We have watched the UN become an instrument of the Soviet Union and its shabby following of despots, large and small. America should never subject her fate to decisions by such an assembly, unless we long for national suicide. Instead, we have independence and freedom.”
http://www.newswithviews.com/Devvy/kidd471.htm
~~
“The International Monetary Fund took on a bigger global role Sunday as its 186 member nations accepted the mantle of guiding a lasting economic recovery from the 20 largest economies.
The IMF’s steering committee endorsed the Group of 20 summit plan for sustainable growth after the worst economic crisis in decades, including an increase in voting rights of at least five percent for under-represented countries.
At their Pittsburgh summit a little more than a week ago, the G20 largest rich and emerging-market economies, asked the IMF to help them shape a robust global economy and reform the fragile financial system.
The International Monetary and Financial Committee (IMFC), representing all members, backed the plan at a meeting in Istanbul ahead of the annual meetings of the IMF and World Bank that open Tuesday.
The panel vowed to maintain stimulus support of growth “until a durable recovery is secured” and take further steps as needed “to revive credit, recover lost jobs, and reverse setbacks in poverty reduction.”
…
http://rawstory.com/2009/10/imf-chief-hails-new-era-of-collaborative-global-governance/
October 5th, 2009 at 1:38 pm
On that last chart, how do you assume an average 100,000 people entering the workforce each month? Does that include Baby Boomers retiring for good (and not getting re-employed into low-wage retail jobs)?
For years already I’ve been reading about this demographic imbalance that’s coming, as a skilled labor vacuum is supposed to drop on us over the next 5-10 years. It’s starting to look like the jobs have just gone away anyways.
!$#@%!, there goes my promotion…
October 5th, 2009 at 1:41 pm
I think it’s somewhat humorous that the word “s0ci@lism” (spelled correctly) is a verboten word by WordPress standards. It’s just that it makes it very difficult to discuss current events with all the corporate s0ci@lism going on lately, as well as other considerations. Very inconvenient.
October 5th, 2009 at 1:41 pm
to be clear, I didn’t post the ’second’ one @ 13:24, it was ‘eaten’ by WP, previous to the 13:02 post..
see WP approved spelling of soci@list @ 13:02..
if it matters..
thanks ED!~
October 5th, 2009 at 1:52 pm
I’m starting to wonder about average hours worked as a “latent unemployment” measurement beginning well before 2007. From a post-WWII mark of 39 hours/week, we’re now down to 30. It was already down to 33 in 2007.
In a sense, the notion of “employment” has been degraded over 60 years.
If you were to measure the blue (Total Nonfarm employment) jobs using a 39-hour weekly basis, the true per capita employment situation would be . . . hideous. The 33 hour basis is only 85% of what it used to be.
October 5th, 2009 at 1:57 pm
IOW, 145 million 2007 jobs convert to only 123 million 1949 jobs. This is an over-simplification to the extent that many people are content with part-time work. But there is certainly reason to believe that many people classified as employed would be very happy to have more hours available.
And of course some part-time jobs (see, e.g., Phil Gramm, Larry Summers) are very lucrative.
October 5th, 2009 at 2:00 pm
http://www.marketwatch.com/story/hsbc-sees-tipping-point-of-western-decline-2009-10-04
HSBC sees tipping point of Western decline
“At the same time, for those worried about a changing of the balance of power on the world stage, it seems evidence is everywhere. Last week we watched China’s bold 60th anniversary National Day Celebration parade in Beijing, including reportedly 50 new weapons systems. Meanwhile, it was Rio de Janeiro that got the vote to host the 2016 Olympics, and not Chicago, despite a personal plea by President Obama. And how many more times will we see Group of Seven meetings in the future, rather than G20, to reflect the new profile of world growth?
HSBC /quotes/nls/hbc (HBC 55.44, +0.43, +0.78%) (UK:HSBA 689.90, +3.40, +0.50%) forecast emerging nations will dominate world economic activity in the years ahead.
Debt burden
A key reason is the debt burden of the developed world. Recent policy may have stabilized financial markets in the West, says HSBC, but individuals and governments remain awash in debt. Banks no longer enjoy the funding conditions of old, and this will combine to be a drag on growth. ”
…All of us capitalists who wish to remain employed know that debt is necessary for capitalism to run smoothly…the Krugman’s of the world don’t talk about the very real problem of not paying off debt in good economic times…since we didn’t, this massive increase in government debt at a time of huge indebtedness will bode very ill, in my opinion.
October 5th, 2009 at 2:05 pm
We are facing a secular change in what full employment means.
The unemployment we have is at depression levels if you look at the rate of change to the employment to population ratio.
Barry likes to defend Goldman and argue that we are not in a deflationary depression but Barry makes seven figures and it truly clueless. I like Barry but what da fa’ does he know about the bottom 80%.
Answer: Bupkis!
October 5th, 2009 at 2:15 pm
Perhaps The Great Contraction instead of The Great Recession is more apt.
October 5th, 2009 at 2:19 pm
Bruce – I read that article – you can sum the whole thing up with these two excerpts.
“HSBC’s CEO can cut his tax bill from 50% to 17% by relocating to Hong Kong.”
“Only time will tell — how much of the rise of the East is just the rise of a bubble?”
Answer – all of it
October 5th, 2009 at 2:25 pm
labor force shrinkage
http://econompicdata.blogspot.com/2009/10/labor-force-shrinkage.html
October 5th, 2009 at 2:26 pm
@Thor:
I listened to NPR on the way to the salt mine this morning..they had a segment on the clothing industry and Knoxville, Tn…about the closing of the huge numbers of mills and manufacturers since 1960 in Knoxville. (There are no longer any, as one would expect)…
Of course we know where these jobs for the lesser educated went, they went to places like China. But this is a long term trend and the Chinese and Indians have been doing very well establishing this lesser-educated base to power the rest of their ambitions. I see today where the Chinese are planning to fund their own movie industry, like the US and like Bollywood.
If this is a bubble, it seems to have a rather good foundation….it seems to me that they will go for a long way on the money they’ve made from us over the years…whether it is buying iron ore developers, or just what, but not being indebted the way we are will serve them well..
Now if we could just export Ken Fisher to them, maybe we’d do ok too……!
October 5th, 2009 at 2:30 pm
@BnT
And the private-equity vampires.
October 5th, 2009 at 2:34 pm
@Bruce – “If this is a bubble, it seems to have a rather good foundation”
No it is not. At all. E117 made a very good point the other day that I’ll paraphrase here. Being bullish on China because you are Bearish on the US is not a valid position. Read through some of the posts from last week on this issue, they were very informative. There were a number of studies, letters, and article, that you might find interesting regarding both China and India.
By the way, why does no one ever list Russia anymore when talking about emerging markets? Last year they were all the rage. I’d imagine the latest statistics on their ongoing population implosion is another nail in the coffin for the “Russia Rising” folks.
October 5th, 2009 at 2:37 pm
China is arguably even dumber than we are – - they’re the ones who keep lending us the money by buying our debt. This is the nation that’s going to lead the world? Please……
Maybe in the next century they will, but I don’t buy it now or any time within the next 2-3 decades. They’re in extend in pretend mode just like we are – - the whole world is.
October 5th, 2009 at 2:37 pm
Bruce -
Below is a link with a very well written study on where China is at today, and what they face in the not too distant future. It’s long but I would high recommend it.
http://www.pivotcapital.com/research.html
October 5th, 2009 at 2:39 pm
@Thor:
I have read the the problems that these population giants will face, and agree there are some intrinsic difficulties.
But I tell you what. Lets say it is the Colts vs the Patriots….
Like, if you were going to bet all or nothing about which country would do better over the next decade, economically, which would you take? China or us? I am not saying which you’d rather live in, just which will do better from an economic standpoint?
I would vote for the buyer of debt rather than the seller….
October 5th, 2009 at 2:40 pm
Interesting quote from the above mentioned paper . . . . .
“Waste and corruption go side by side with the mega infrastructure projects financed by easy loans. For an anecdotal example we refer to a Forbes story that mentions a modern 2.9km elevated highway torn down in Hunan and a bridge in Sichuan that was finally demolished after 380kg of dynamite failed to topple it all in order to rebuild them so that the stimulus money could be spent.
Now – you tell me if this sounds like it’s build on a rather stable foundation? (pun intended)
October 5th, 2009 at 2:42 pm
Bruce – with all due respect – we debated this intensively days ago so I don’t want to re-hash everything. You go ahead and bet on China and India. Let me know how that works out for you 5 years from now. I’ll take my chances and bet on no one at the moment (including the US)
October 5th, 2009 at 2:55 pm
And to tie the above arguments into the topic of this thread -
The headline unemployment rate of 4.3% only takes into account urban people registered as unemployed and
is a poor reflection of reality. For example, the Chinese Academy of Social Sciences performed a study in mid 2008 that estimated the urban unemployment rate to be 9.4%, more than double the official headline. Then there are 140- 160mn migrant workers, as well as unemployed people in rural areas. Estimating the true level of unemployment is practically impossible and politically undesirable, but even the National Bureau of Statistics put a number of migrant jobless at 23mn (this would add another 3% to the unemployment rate). Finally, at the very end of the spectrum, there are reports of unofficial surveys conducted by the NBS that estimated total unemployment rates as high as 27%. Almost 1mn graduates from the class of 2008 are still unemployed, and according to surveys about 60% of this year’s 6mn graduates have not found work yet, an indicator that unemployment is a problem for the white collar urban workers as well
October 5th, 2009 at 2:56 pm
Manny:
I think the increase in the middle class will change the structure of the communism the Chinese now have. They too, we will all just have to observe and see. But I think the days of Mao, and the unquestioned party line are over…
I think any society can and does change…sometimes for the better…sometimes not.
October 5th, 2009 at 2:57 pm
Bruce,
you should take a gander @ http://www.ritholtz.com/blog/2009/10/janet-tavakoli-on-max-keisers-show/
one read of it= “Debt Buyers” are scr****..
~~
as an aside, Tavakoli is one of the ’sharpest knives in the drawer’, Keiser, the same..
October 5th, 2009 at 2:59 pm
@Bruce: Perhaps you are right, but there are still way too many dirt poor people in China for that to happen, and my guess is the elite there will never allow a real large middle class to develop. They’ll just be like our elites here and keep most of the spoils of any “productivity” for themselves, while doling out mere breadcrumbs (and circuses) to keep most of the Sheeple just “happy” and dumb/ignorant enought to perpetuate this cycle.
October 5th, 2009 at 3:04 pm
the other reason for not getting in a bigger middle class. its easier to control the poor than those in the middle class. and its still a dictatorship. no matter how its perceived
October 5th, 2009 at 3:09 pm
@willid2: Precisely and I would submit to you that buyers of our bad debt are dumber than we are – they’re the ones who keep lending us the money when no sane person think it will ever be repaid.
October 5th, 2009 at 3:14 pm
MEH – great link/interview – she’s pretty harsh on the inflationists isn’t she?
October 5th, 2009 at 3:22 pm
Guys:
I am no economist. I rely more on my gut. I read, digest, then with luck form a conclusion.
You may be right about China. The structure they are under will always be a burden to progress, but I wonder which is worse…the communist structure, or the chronic massive indebtedness we face…and you know I am not talking about individual freedom, like voting. I mean economic freedom as a country as a whole. Yes, they are doing goofy things with their infrastructure stimulus, we’ve all read about those…but they have the money to waste, and while we don’t have the money, we seem to be equal opportunity wasters…
Some day, the piper will be paid. The Chinese piper may be communism itself…our piper is less than stellar elected officials that have made economic decisions that will also have to be righted…
October 5th, 2009 at 3:29 pm
@Bruce in Tn – don’t waste your breath arguing about this. I already tried a few days ago. Some just don’t get it. period. Ask where the new MBA graduates are going for job opportunities.
http://www.nytimes.com/2009/08/11/business/economy/11expats.html
October 5th, 2009 at 3:31 pm
@manhattan: We “don’t get it” because we don’t agree with you? I’m not entirely sure that I’m right (in fact, I used to think like you on this issue, but have changed my mind in recent months), but how can you be SO SURE that you’re definitely right here? Seriously……
October 5th, 2009 at 3:36 pm
“in fact, I used to think like you on this issue, but have changed my mind in recent months”
we just see things differently. No worries. I wasn’t referring to you in that post btw.
October 5th, 2009 at 3:39 pm
@manhattan: No worries. Sorry I jumped on you a bit. I can definitely see your point of view on this one. I just think it’s going to play out on a bit longer timeframe than we think it will, but I’m certainly open to changing my mind…..AGAIN.
October 5th, 2009 at 3:43 pm
Thanks…..that is what I like about this blog…
October 5th, 2009 at 4:13 pm
@manhattanguy,
I tend to think the “Here’s where new MBA grads are going” stories are even more reliable than magazine cover indicators
.
Every new MBA was trying to get a dot com job in 1999/2000……..
Nowadays, things are a bit different, especially since US companies aren’t hiring that much, and especially the IBs are not providing the usual “landing spot” for new MBAs.
October 5th, 2009 at 4:36 pm
XLF may, or may not, constitute a perfect short again after today’s GS sponsored rally….
Retail sales tomorrow. Oil/gold/silver rallied today, because traders bought the front month contract.
I refuse to try to explain this market in macro terms when “it went up” explains it much better.
Glad I wasn’t short today. Put some positions on into the close.
October 5th, 2009 at 5:28 pm
That last chart seems overly optimistic to me … I see no reason to assume that we will see a sharp “knee” upward starting in March of 2010, and instead expect a period of mushiness over the summer of 2010, with a very gently upwardly-sloping employment (less-bad unemployment) proceeding from there. Until we get rid of our excess of debt, the economy is not going to be able to bounce back in any way similar to past recoveries.
The idea behind a recession is that the bad stuff gets washed away, freeing the economy to soar once more. This time we have held onto the stuff that shoulda been washed away with a death-grip. No dumping of the toxic ballast, no energetic recovery.
October 5th, 2009 at 7:54 pm
IOW, 145 million 2007 jobs convert to only 123 million 1949 jobs. This is an over-simplification to the extent that many people are content with part-time work. But there is certainly reason to believe that many people classified as employed would be very happy to have more hours available.
They are probably too busy commuting between two part time jobs to work the extra hours
October 5th, 2009 at 9:11 pm
Getting in late. Was in Beijing just a few years back. Wanting to practice my Chinese.
They wanted to practice their English. Timing.
China and India are completely and totally alike. Hot spots. Money. Poverty.
The Chinese try to keep the rurals out of their cities, trying to save them for the “elites” and “techno-elites”. Racism? Try being Mongolian.
My sense is governments now feel like they have the required technology to PROTECT these hot spots and let the rest of the country rot.
Just like us.