How Scared Are Americans of Job Losses?

When I was a kid, it was called "Chinese whispers". Today I believe it's called "Telephone". Either way, it's a game where you start with something like this:

A majority of Americans, 55 percent, say they are just making ends meet, with more than 6 in 10 concerned that someone in their household might lose his job in the next year.

And it comes out, a few days later, like this:

Over six in ten Americans think that someone in their household will lose their job in the next year. That means six in ten people won't buy anything other than basics. The economy comes to a full halt even worse than now.

It's entirely reasonable for any household -- with the possible exception of the one at 1600 Pennsylvania Ave -- to be concerned about a possible redundancy this year. But that's a long stretch from positively believing that it is going to happen.

Right now, unemployment is at 7.6%, or 11.6 million individuals. Let's say the worst-case scenarios come true, and it spikes all the way up to 10%. That mean another 2.8 million people or so being added to the unemployment figures on a net basis; let's call it 4 million on a gross basis. There are 105 million households in the US. So even in a worst-case scenario, the chances of any given household suffering a job loss this year are slim. They're far too high, but they're slim.

What's more, not everybody who expects to lose their job immediately cuts back their spending to basics only. Some people do; others don't.

There are lots of reasons why people are cutting back spending right now, and fear of unemployment is only one of them -- and not even the most important one. The fact that many people don't have any more access to credit is surely a much bigger factor, and consumer-price deflation plays a very important role as well. So yes, the animal spirits of the US are weak. But they're not as weak as all that.

Comments

[wes mantooth:]

Unemployment is far higher than reported. This is not a mental recession.

Feb 28 02:30 PM

[xsellside:]

73.287% of all statistics are wrong. According to the broadest BLS figure and SDS, unemployment is already well into the double digits: www.shadowstats.com/im...

Feb 28 02:32 PM

[Dave Wrixon:]

Who said 10% unemployment is a Worst Case Scenario. I am working on the basis it is a racing certainty. Worst case would be nearer 15%, and even that is not an upper-bound.

Feb 28 02:35 PM

[@TexasER:]

The Q4 GDP growth rate was underestimated by over 60%. Just revised downward on Friday. So why should John Q. trust the unemployment estimate? The numbers you cite tell me the average citizen doesn't trust them and is expecting much worse than policy makers.

Good data point.

Feb 28 03:01 PM

[DownHillFro...:]

"not everyone who expects to lose their job immediately cuts back on spending"???? what is he talking about??? Granted not everyone has or will cut back to just the basics but it's obvious everyone HAS cut back! And to blame the decrease in spending on the lack of credit is even more lame. AMEX, Visa, MC haven't taken away enough credit cards or reduced credit limits enough yet to cause the spending crash as Mr. Salmon's article will have you believe. My husband and I curtailed our spending mid last year including putting all major purchases put on hold. And since I've lost my job this month our spending is now much lower and well within our reduced budget limits. We still have credit cards (not being used), a mortgage, etc. Credit is not the problem. Lack of job security certainly IS!!!!!

Feb 28 03:08 PM

[bcncv:]

A lot of people are missing the point. The point is not that things are good or bad, but that you need to keep perspective on HOW bad they are.

It's worth the time to remember that the sky is not falling, we are not looking at the collapse of civilization as we know it, and we are most likely not looking at a great depression scenario. Yes, things are bad, but life will still go on as usual for the majority of Americans.

Feb 28 05:20 PM

[Roger Knights:]

For a year or two, anyway.

Feb 28 05:26 PM

[zermux:]

U6 is a better unemployment number than the official headline reports. Last time I looked it was at 14% and i would expect it to be over 20% before the end of the year.

PS. They should rename the bank stress tests to "pretend everything is okay" test.

Feb 28 06:51 PM

[Ricard:]

Worst case scenario is 100%.


On Feb 28 02:35 PM Dave Wrixon wrote:

> Who said 10% unemployment is a Worst Case Scenario. I am working
> on the basis it is a racing certainty. Worst case would be nearer
> 15%, and even that is not an upper-bound.

Feb 28 06:57 PM

[Sentinel:]

Since we are all bantying about stats go to Shadowstats.com to see how the Feds do the numbers vs. how they USED to do the numbers.....or still do and just don't release them as "official" and "clear for Main Stream Media Release".

Click here....www.shadowstats.com/al...

Zermux is correct U6 is a better number for unemployment because our economy just doesn't take a hit from the unemployed but from those who can't find full-time work but have to take part-time. Try supporting this economy on the backs of EMPLOYED people who make HALF their hours and less than HALF their full time pay.

But if you count those who have just dropped out of the system because their unemployment ran out or they just quit trying or went back to mommy or to school THEN the unemployment rate is around 18%.....getting closer to that magical 25% mark during the Great Depression.

Oh by the way bncv....we ARE looking at a Great Depression, and at internet speed and the Cornucopian (American Utopian viewpoint that the horn of plenty will never stop overflowing with milk and honey) culture IS coming to an end unless you find a way...

To bring back enough CHEAP DOMESTIC OIL to fuel the exponential growth that this country has enjoyed since the Industrial Revolution of the late 1800's through the early 1970's....

AND bring back manufacturing.....

AND you force the Feds to not only cut our deficit but our debt...

AND you allow the banks to fail and every other person in this country up to their eyeballs in personal, auto, student loan, 1st mortgage, 2nd mortgage, credit card, revolving, Commercial Real Estate and other sorts of debt.....

AND you stop the creeping doom of Fabian Socialism ala The Messiah....

AND you fix Medicaid/Medicare....

AND you fix Social Security.....

AND you flush out the TRILLIONS OF DOLLARS being printed now and in the future by the Bernanke Gang.....

You pull that off bncv...... and you'll avoid your Great Depression.

Otherwise, I advise you stock up on a butt-load of Zoloft, because you're in for a depression one way or the other.....probably both!

Feb 28 07:38 PM

[malach hamo...:]

math is wrong - if the average out of work is 6 months, and the unemployment rate is 10%, then 1 in 4 households will suffer some unemployment

further, the fact that one doesen't loose a job, the mere risk should be enough to increase savings and prepare for the worst. it is virtual insanity for anyone to take on additional financial commitments unless he is assured of continued employment

Feb 28 07:40 PM

[Daniel Herkes:]

That's right. This is a scenario without a boundary because it is a new situation. The world has never experienced a loss of confidence like this before,and we are all chained to the same oar. The loss of house value, the end of easy credit, and no the fear caused by a very real era of uncertainty has lead to a new place in the economic hall of mirrors.

Enough.


On Feb 28 02:35 PM Dave Wrixon wrote:

> Who said 10% unemployment is a Worst Case Scenario. I am working
> on the basis it is a racing certainty. Worst case would be nearer
> 15%, and even that is not an upper-bound.

Feb 28 08:21 PM

[wise:]

The article makes his point that the papers will put the worst spin, it happened to me in the early Eighties-media does not understand economics or business

Feb 28 10:48 PM

[Big K:]

Most folks should be buying only the basics now. On food, beans and rice should be the bulk of what you buy because they are cheap and nutritious. I'm storing up several years of canned foods, dry goods, etc. People should also store up a significant amount of cash in a safe place. I fear the credit cards will all be cancelled and then it will be too late to get cash out of the bank, most of which will close. The only money around will then be what is in your pocket. I think it is best to make your own bank. Hoard physical gold as well. The crash is coming, and we ain't seen nothing yet!

Feb 28 11:43 PM

[xsellside:]

It's a recession if your neighbor loses his job; it's a depression if you lose yours.

Mar 01 01:03 AM

[xsellside:]

It's a recession if your neighbor loses his job; it's a depression if you lose yours.

Mar 01 01:03 AM

[Jake Berzon:]

I concur with the above commentators, who mentioned that true unemployment figure is not accurately reported and that even the under reported official unemployment figure can shoot above 10% by the year end. (With all the money being pumped by our government into the largest employers like the banks and automakers, I don't actually anticipate unemployment breaching 10%.)

On the other hand, while actual job losses may not be so overwhelming, people so many people worrying about loosing their jobs is a real problem, because most who worry will curtail their spending... The worst thing about this situation is that short of US becoming a socialist country, there is nothing you can do about people worrying about job losses!

Mar 01 01:12 AM

[Al-USA:]

Eighty percent of Americans have been falling behind since 1973. That is the date they usually cite for the oil crisis.

Nowadays a husband and wife make less money than the husband alone made at that time. On the other hand, some people have become fabulously rich. One percent owns everything - like the banksters getting bailed out to the tune of $trillions!

Under them there is a further twenty percent who support the American Empire. These are the lawyers, the journalists, politicians and bankers and so on. The one percent hires the twenty percent."

I suspect those who buy the lies of unemployment will be among the 20% under the 1%. However, if the Greater Depression goes on for 16 years, even the 20% will see a dramatic reduction. In any event, remember 1873...

Mar 01 03:33 AM

[Al-USA:]

I agree with Big K about buying up the basics.

On the basis of the colossal debts the USA has been building up the "financial crisis" could very well end as an economic collapse. I mean, this must lead to monetary breakdown at some stage. In my opinion, the writing is on the wall.

Now, trying to look at things from the perspective of the ruling class, the best solution they can deploy, like they did in the Depression of the 1930s, is a reformist President along the lines of F. D. Roosevelt who will introduce something like the New Deal. If not, we will end up with a REAL dictatorship. Is Obama that man? I don't know, he certainly talks the part.

However, the fact is, America is already ruled by a dictatorship - the dictatorship of Money, of the "corporate masters" who make all the real decisions while giving the masses the illusion of democracy. But democracy in America, as in Europe and elsewhere in the West, is only a sham, a hollow shell.

It is, like the institutions of the Roman Republic in the early days of the Empire, when the emperors kept up the pretense of defending the old regime, while real power was concentrated in the hands of the emperor and the army.

It is an American Empire, but as the "financial crisis" has shown, it is more like a colossus with feet of clay. Quite simply, America is in the process of overreaching itself just as the Roman Empire overreached itself.

On the bright side, there's no need to worry about the American people. The establishment treats us as if we are fools, but we are not fools. Information is still widely available and the American people can learn, both online and from relevant books. They will learn most from the greatest book of all - the book of life itself. And when than happens, the American people will move as one...

Mar 01 04:06 AM

[Ethel-To-Tilly:]

I'm really surprised that no one has caught the logical fallicy inherent in Salmon's argument. 6 out of 10 families think they will be adversely affected by layoffs - but in his worst case scenario only 4 out of 105 million really are so the chances of any particular family being affected are "slim".

But the problem right now isn't the lack of demand caused by those who are unemployed - but the lack of demand caused by those who think they will be unemployed - because they don't know if they will be among those 4 million out of 105 million .

I am reasonable sure that my job is ok for the next 6 months maybe. I might be lucky enough to completely avoid being among those unlucky 4 million out of 105 million - but as long as that fear lasts, regardless of whether I actually do lose my job or not - I won't be buying that big screen TV that I've been wanting. Salmon tries to minimize the actual lack of demand cause by job loss to limiting the effect solely down to the numbers of those who actually lose their jobs - but the real metric is the much larger number - those who are in fear of losing their jobs - fully 60%+ of the 105 million families.

Mar 01 11:44 AM