One Scary Unemployment Chart 40 comments
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Thanks to reader Linda for sending this chart; as they say, a picture is a worth 1000 words. What we show below is the number of job losses versus the peak employment level.... i.e. how many are lost versus the highwater mark in employment.
As I was stating throughout 2008 as the "bottom pickers" were telling us to buy stocks, "they" were using the wrong playbook. Most market participants under the age of 50 have been living in a world of corporate-led recessions... not a consumer-led recession. This is why (even if you exclude the financial destruction) this was going to be something akin to the early 80s or late 70s - the last consumer-led recession.
I'd argue in the few decades since our economy has transformed even more to a "service based" economy which is dependent on people shopping, it's an even more perverse loop to the downside than if we had similar conditions in the late 70s or early 80s. Now, anyone who studies history will know how much deeper consumer-led recessions are, but apparently our public school systems (and MBA programs) are not churning out the type who bother with history... not that important I guess. But I don't blame these people for getting it wrong; our "best and brightest" in the Federal Reserve completely missed the boat as well, along with former Goldman Sachs executives running the U.S. Treasury.
Now here is the scary part - at this point during the past two recessions we were flattening out (1990) or reducing our rate of decline sharply (2001). And once again the tired bulls are using the wrong playbook... they cling to "well it can't last that long, after all, the recession started in Dec 2007 so on average it lasts blah blah, so therefore blah blah blah must come out of recession by blah blah date". It's getting tiring listening to "playbooks". Wake up folks.
We're already down 3.5 million jobs from peak, and I've called for potentially 4 million more to go in the remaining 11 months of 2009; Nouriel Roubini [Feb 6: What Would Roubini Do?] makes me sound like a bright eyed bushy tailed Kool Aid drinker with his call for 6 million. Let's go with my number - that would take us somewhere into the mid 7 millions as we sit 11 months from now. Go ahead and project that angle and duration on the chart above and get back to me with your talk of 2nd half recoveries. (p.s. one note - the employed population of the U.S. is larger now than 1990 or 2001 so of course by nature the job losses will be larger; but that does not "excuse away" the degradation in this chart)
And for the optimists out there talking about the recovery, I'd like to point out that in the relatively mild early 90s recession it took 32 months to get back to the peak employment level, and in the "jobless recovery" of the early 00s, it took nearly 50 months. We're in month 13 and the potential for job losses (in my mind) goes out to month 26-30 before we flatten out. How long before you think we reach the credit induced, house building, credit card spending, 0% car loan buying employment levels we enjoyed in 2004-2006? Buckle down folks - it's going to be a few years of "dark" ... [Dec 15: The Economic "Recovery"]
But not to worry, the "2nd half 2009" recovery is almost here (Jul 1, 2009!) and Obama will be creating 2M... I'm sorry, 2.5M... he meant 3M... err let's call it an even 4M jobs so the "V shape" rebound on this chart awaits us soon.
Kool Aid!
EDIT 1 PM: Just saw this chart below via Time via Kedrosky's blog - this helps fix the "population growth" issue we mentioned above. Now let me remind newer readers that current unemployment statistics have been "adjusted" since the Clinton years with an upward bias, so I believe both the absolute number of job losses are incorrect (understated), and hence the trajectory of the current downward push is as well. But this would be a better way to look at it - it would be even better if the government had stuck to consistent reporting of employment figures .... they believe "we can't handle the truth" I suppose.
Also this highlights (purple line) why the 2002-2004 recovery was called the "jobless recovery" even better than the graph above. On an anecdotal level, it also appears that in the Greenspan era where he tried to eliminate the business cycle by flooding the world with easy money each time we ran into trouble, we had long drawn-out recoveries, but shallower down periods.
In the pre-Greenspan era, we had a natural business cycle - sharp downdrafts but quick reversals. The difference between "taking your medicine" and "kicking the can down the road" is very apparent. We are now embarking on the biggest "kick the can down the road" moment, if history is any guide (based on what we see below). Just another reason to not believe that a government engineering business cycle will recover fast. We should take our pain, as bad as it will be, and then set the stage for a recovery in 12-18 months. But that is not politically convenient anymore....
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• The historical unemployment rate used to be much higher than it is now. In fact, in the early 1980's, the unemployment rate almost hit 11%. I think it's very odd to now being loading up on trillion dollar debts to address a so-called massive unemployment rate of only 7.6%.
----------------------...
A vague sentiment without any specifics.
Here's one: Are you prepared to see Bank of America and Citibank go bankrupt? Are you prepared to see the %40 or so of mortgages which are underwater go into foreclosure? Are you prepared to wait years as the courts (which don't begin to have the resources to process failures of this magnitude) try to figure out who pays what to whom?
Its not "political convenience" that leads folks to look for some solution other than a meltdown-- its a desire not to eat cat food for a decade.
Human sacrifice , whether practiced by the Mayans , or by the power elitists governing and controlling our nation and its industries are likely to lead to the same results experienced by those same extinct societies.
As far as job growth, we can't really thrive in this "Service Economy".
Because what that really means is that we're happy to be Wal-Mart greeters, Best-Buy 'associates' and burger flippers. We won't grow just by selling stuff manufactured elsewhere.
It's time to tarrif China and whomever else manufactures under conditions we've legislated as 'unfit'. If we choose to hamper our businesses by requiring OSHA and EPA compliance, and all the other govt. regulations that put us at a severe manufacturing disadvantage, then we should level the field with tariffs. Trade war? Bring it. China needs our market more than we need theirs.
Why is it that the republicans are completely againist this? what happens if it does work? that will make the republicans look really bad. but, if it doesn't work, Obama is finished, because there is now way they will put another trillion dollars on the table, which congress can vote on. Wont happen
The willingness to spend has gotten us into trouble, we need to save some money for a change and reset what has happened.
Are you saying people are foolishly being afraid of losing their jobs? Tell that to the 3 million plus who have already lost their jobs that they worried for nothing. Wake up.
On another note, it sure would be nice to see a star athlete sign a contract for only $ 4,000,000 a year rather than $ 20,000,000, and a star make a movie for $ 3,000,000 instead of $ 15,000,000. That would send a nice signal to people that money doesn't grow on trees and that maybe, just maybe, we actually have to work for a living and live within our means. Of course nothing wrong with living on the fringe of our means, but it just got too far. The American Idol mentality that one day magically you'll become a millionaire needs to be fixed.
On Feb 09 07:22 PM CJJ wrote:
> Nothing has happened to demand. The problem is the willingness to
> spend is what is suffering because people are afraid they are going
> to lose their jobs and all they hear on the news or read is dumb
> morons like you spreading the word that we all need to live within
> our means...(basically don't buy anything while I'm making more money
> than I know what to do with shorting the s out of any and every company).
On Feb 09 07:36 PM jimojimo wrote:
> As far as job growth, we can't really thrive in this "Service Economy".
>
>
> Because what that really means is that we're happy to be Wal-Mart
> greeters, Best-Buy 'associates' and burger flippers. We won't grow
> just by selling stuff manufactured elsewhere.
>
> It's time to tarrif China and whomever else manufactures under conditions
> we've legislated as 'unfit'. If we choose to hamper our businesses
> by requiring OSHA and EPA compliance, and all the other govt. regulations
> that put us at a severe manufacturing disadvantage, then we should
> level the field with tariffs. Trade war? Bring it. China needs our
> market more than we need theirs.
On Feb 09 07:36 PM jimojimo wrote:
> As far as job growth, we can't really thrive in this "Service Economy".
>
>
> Because what that really means is that we're happy to be Wal-Mart
> greeters, Best-Buy 'associates' and burger flippers. We won't grow
> just by selling stuff manufactured elsewhere.
>
> It's time to tarrif China and whomever else manufactures under conditions
> we've legislated as 'unfit'. If we choose to hamper our businesses
> by requiring OSHA and EPA compliance, and all the other govt. regulations
> that put us at a severe manufacturing disadvantage, then we should
> level the field with tariffs. Trade war? Bring it. China needs our
> market more than we need theirs.
You're second chart apears to be done the right way and all it tells us (so far) is that relative job losses are as bad as the've been since 1974. Likely not a big surprise to anyone reading this. How far will job losses go? I don't know, but I know your use of this data here offers little predictive value.
On Feb 09 07:36 PM jimojimo wrote:
> We never *really* came out of the 2001 recession...we just borrowed
> more and faked our way through. Now that the bulk of the money that
> was floating around for the past 8 years or so has been found to
> be artifically pumped up housing value, it's time to pay the piper.
>
>
> As far as job growth, we can't really thrive in this "Service Economy".
>
>
> Because what that really means is that we're happy to be Wal-Mart
> greeters, Best-Buy 'associates' and burger flippers. We won't grow
> just by selling stuff manufactured elsewhere.
>
> It's time to tarrif China and whomever else manufactures under conditions
> we've legislated as 'unfit'. If we choose to hamper our businesses
> by requiring OSHA and EPA compliance, and all the other govt. regulations
> that put us at a severe manufacturing disadvantage, then we should
> level the field with tariffs. Trade war? Bring it. China needs
> our market more than we need theirs.
Regarding 2001, I agree. We prolonged the negative effects of this by giving banks and financial institutions the right to hide some of their loses off the balance sheet after the Internet bubble.
Rather than pay it off they decided they could balloon them in the dark while justifying their dizzying pay hikes and bonuses. CDS CDO derivatives were invented to benefit from this loophole and mushroomed into over $40 trillion. Even today these derivatives have morphed into gambles on the next bubble, Treasury default gambling. To think they are now betting on the US government defaulting. It's a bit unAmerican. And there is no regulation of it. That's what they are doing with your bailout $.
Dumb they are not. If there is a way they can enrich themselves at the cost of the public interest they will always do it.
PS: By the way Paulson didn't miss the boat on this one. He actually bet Goldman's money on the mortgage market collapsing by betting the bonds they wrote would default. They cleaned up using CDS and CDOs contracts they convinced AIG to write to them. The only way they got in trouble is that they fleeced their clients so much they became unable to pay. That's why Paulson had AIG bailed out. To pay the contracts they owed to his firm Goldman Sacs. Funny and sad at the same time. He makes Bernie Madoff look like a 2nd rate pickpocket.
Let's just do nothing and expect it to all work out. Moronic. It'd be great to let the people who want to do this to have Montana and give it a try. Except we'd build a wall keeping you in so you can live with your awful choice.
So get to it, you've got a little over 3 years to get yourself ready.
Oh, no takers...okay...then deal with it or move.
On Feb 09 07:02 PM lucky lenny wrote:
> • are the Democrats playing politics with the unemployment rate.
>
>
> • The historical unemployment rate used to be much higher than it
> is now. In fact, in the early 1980's, the unemployment rate almost
> hit 11%. I think it's very odd to now being loading up on trillion
> dollar debts to address a so-called massive unemployment rate of
> only 7.6%.
You are correct. If the stimulus fails, there wont be a second chance. Deflationary Depression here we come! That's why there's a much bigger risk of the stimulus being too small than of it being too big.
On Feb 09 07:37 PM joshuaodonnell wrote:
> ah, this is nothing. We can easily see 25% unemployment...if the
> auto industry fails, will easily go into double digits.... and will
> certaintly go up higher if the Obama stimulus does not work..which
> the republicans really do believe wont work...
>
> Why is it that the republicans are completely againist this? what
> happens if it does work? that will make the republicans look really
> bad. but, if it doesn't work, Obama is finished, because there is
> now way they will put another trillion dollars on the table, which
> congress can vote on. Wont happen
The '91 and '01 recessions were shallow but flat in terms of recovery. More U shaped.
The other thing to keep in mind is that after secular bear markets you get secular bull markets. Maybe 2000-2009 will be regarded as such when economic historians write the book on this period in time.
On Feb 09 08:30 PM lbrtkng wrote:
> You're first chart needs to be normalized in some way (like % from
> peak from each recession) in order to offer any real insight. You
> should have put depression era job losses on there too and you could
> have made it look even more dramatic... but it still would offer
> little insight or value.
>
> You're second chart apears to be done the right way and all it tells
> us (so far) is that relative job losses are as bad as the've been
> since 1974. Likely not a big surprise to anyone reading this. How
> far will job losses go? I don't know, but I know your use of this
> data here offers little predictive value.