17 Million to Be Unemployed in 30 Days?

I posted an article on my Instablog on May 8th (The April Unemployment Report -- Lies, Damned Lies, and Statistics) in which, after I described the implausible methodology the Bureau of Labor Statistics uses to contrive unemployment numbers, I cautioned about an upcoming train wreck. That train wreck arrives in less than 30 days.

The National Center for Education Statistics reports that in “academic year 2008-2009, the U.S. is projected to experience a peak of approximately 3.2 million students graduating from public and private high schools.” You can see state-by-state projections here if you are interested. Now, the BLS may decide these are all “seasonal” workers, or assume they are all going on to college, or not add them until after the summer ends, but how they report won’t change the facts: Most of these kids will need a job.

Even accepting the (understated) BLS unemployment numbers, there are currently 13.7 million unemployed Americans. If up to 3.2 million of their children are about to join them, that’s roughly 17 million people who will all be vying for a diminished number of jobs starting in June. Most are likely to be disillusioned. And many of these are kids who were told to stay in school in order to get a better job.

I am bearish on the market for the short term based on the above and many of my other indicators. I am also in the minority camp that suspects we are in the middle (at the top but in the middle) of a “W-shaped” economic recession. Looking over this next valley, however, I remain an uncompromising optimist on the future of my country. Big corporations’ executive ego and greed and government over-reaching may have gotten us into this mess, but American entrepreneurs, small businesses, common sense, and hard work will get us out of it. It’s just going to take longer than most people expect.

I am investing accordingly. I’m in income and inverse ETFs now but I can’t wait to get back into cash, probably at the end of this summer / early in the fall, when I imagine we’ll be able to begin scooping up the absolute bargains I think will then await the patient.

I believe the mouth-watering discounts that will be available at the bottom of this next decline will be seen as generational lows. After we rebuild our financial system and realize our safest route lies not in “too big to fail” megaliths but in many more, albeit smaller, institutions all vying for our business, people will look back on the fall of 2009 and winter of 2010 and say, “If only I’d bought back then…”

As I wrote in that same Instablog posting,

The discerning investor looks over the hill to what will influence the numbers in the future. You can’t sell investments you buy long today in the past. You might sell them in the immediate future, by day-trading. More likely, you plan to sell at some point in the later-than-today future. That’s why the discerning investor looks to what is most likely to happen sometime after today.

Looking ahead a couple months doesn’t look all that bright to me. Looking ahead to next year, however, the light is blinding.

DISCLOSURE: Long quality bond funds SHY, BND and AGG, cash, and inverse ETFs SH, SBB, SRS, SEF, REW.

Comments

[damienhaas:]

"Big corporations’ executive ego and greed and government over-reaching may have gotten us into this mess, but American entrepreneurs, small businesses, common sense, and hard work will get us out of it. It’s just going to take longer than most people expect"

2 points to make

1. All the bailout money seems to goes to the Mega banks and the auto Industry, What is left for the small business? Credit from bank are still very tight for small business, depend on them for recovery will be a very long bet.

2. Old generation of American are very hardworking and able to take pain and hardship, How about the younger generation? Will they able to take hardship and create a new and better economy for the United States?

May 12 05:50 AM

[User 353732:]

Perhaps one reason why so many recent and impending college graduates face bleak employment prospects is the growing mismatch between many aspects of college education and the changing requirements of the economy. Even in these hard times we all hear of jobs that remain unfilled. Colleges teach both specific facts/intellectual processes/ways of interpreting the world and an attitude.
Symbolic logic manipulation jobs(e.g finance, marketing) have vanished at a much higher rate than either traditional jobs or jobs that require deep vertical knowledge and very specific training or jobs that require the abilty to improvise, innovate and perform in unstructured ways and cope with uncertainty.
Many colleges also inculcate a cultural attitude that white collar, big city jobs are more socially and financially desirable than other kinds of jobs or jobs in small cities and towns. This attitude creates a false sense of entitlements/expectations and a certain unwillingness to undertake or learn(or even apply for) jobs that require getting hands dirty in some sense or patience and empathy with people or a combination of practical intelligence and learned craftsmanship.
People are rightly begining to question whether the current four year college program or many graduate study programs are really worth the investment in time and money for people who do not intend to enter the "credentialed/certific... professions(such as medicine, law, accounting, engineering, architecture and advanced research/teaching).
It may be that for millions of young people the 2 year, vocation oriented track leading to a couple of years of apprenticeship and on the job training may be a better path to job satisfaction and financial security.

May 12 06:15 AM

[Gyoza Mimi:]

Cetin,

Double-deep recessions are rare - I guess that depends on what part of the chart you looking for. Ignore the first "V" in "W" and you get a "V"-shaped recovery. 1974 was "W", 1981-1982 was more of a "WWW" recovery, 1987 was "L", 2002-2003 was again a "W" or "WWW" (depending on the scale chosen). Do you mind pointing me to your statistical analysis of "V" vs. "W" recoveries?

May 12 09:08 AM

[Bjarne Jensen:]

Joe, I'd like to agree with you but I think your basic premis, "American entrepreneurs, small businesses, common sense, and hard work will get us out of it", is no longer true in the United States. (1) I agree that entrepreneurial wealth will acrew to high tech scientific innovation. The required scientific knowledge is being discovered and engineered in major research universities. But, if you look at the demographics in the graduate hard science programs in those universities, you will see that the overwhelming majority of graduate students are Asian. Ten years ago they went to work for American companies. Now they are taking their newly acquired knowledge back home to teach in their own universities and start their own companies. The vast majority of entrepreneurial wealth will acrew to Asian companies.

(2) Other than 'high tech' what businesses can small companies start today that creates wealth rather than just churns money? A new fast food restaurant chain? Hardly! High Tech is the answer and as per #1 above the majority of those companies will be stated elsewhere. (3) Common sense and hard work? Half of our population is an economic drain to our economy and the other half is taking the easy out by preparing themselves for careers in sociology and humanities. Is there any economic contribution coming from Social Workers and government employees? I don't think so.

Yes, I agree that we are on the cusp of a new era of wealth growth. Unfortunately, it looks to me like the wealth will go to Asia not America.

May 12 10:19 AM

[No one:]

If the market dips below the March lows, it is the end of the United States of America. Number one, it would mean that 9.6 trillion dollars was not enough to jumpstart the economy. Number two, by 2015 one dollar of more loans to aid the economy will result in a zero increase in GDP. So what is your point, we simply need more time period, or do we need more time because you missed the entire move so far and need consideration? W's are rare. I've never seen an h or an a. Maybe we need to invent some more letters. Regardless of what happens it is staggeringly strange to me that people did not think the market would go up with the injection of that much money into the economy.

May 12 10:53 AM

[Jason Rines...:]

I can't speak for others but after 8 years of volatility in the digital tech marketing space has created some necessary executive skills. Refinement by fire so to speak. Government is and will continue crowding out the private sector for awhile. This adds further pressure and forced refinements to the dwindling pile of innovators. When the levy of corruption finally breaks, there will be some very lean and mean executives ready to rise to the occasion. Also am in the W shaped minority Mr. Shaefer.


On May 12 05:50 AM damienhaas wrote:

> "Big corporations’ executive ego and greed and government over-reaching
> may have gotten us into this mess, but American entrepreneurs, small
> businesses, common sense, and hard work will get us out of it. It’s
> just going to take longer than most people expect"
>
> 2 points to make
>
> 1. All the bailout money seems to goes to the Mega banks and the
> auto Industry, What is left for the small business? Credit from bank
> are still very tight for small business, depend on them for recovery
> will be a very long bet.
>
> 2. Old generation of American are very hardworking and able to take
> pain and hardship, How about the younger generation? Will they able
> to take hardship and create a new and better economy for the United
> States?

May 12 11:28 AM

[realold:]

One of the best summaries I have seen in some time.
We have been encouraging the export of our knowledge, skills and experience for decades, God knows why, and it is now going to kill us.

I know some very successful small business families and their wealth came from risk, hard work and opportunity. The opportunity for them is being drained rapidly away by regulation, taxes and artificial constraints.

Unless this country starts worrying about US and not the rest of the world, we don't stand a chance against Asia and, eventually, South America. Global warming isssues will seem pretty silly when you cannot feed or protect your children NOW. Wake up America.




On May 12 10:19 AM Bjarne Jensen wrote:

> Joe, I'd like to agree with you but I think your basic premis, "American
> entrepreneurs, small businesses, common sense, and hard work will
> get us out of it", is no longer true in the United States. (1) I
> agree that entrepreneurial wealth will acrew to high tech scientific
> innovation. The required scientific knowledge is being discovered
> and engineered in major research universities. But, if you look at
> the demographics in the graduate hard science programs in those universities,
> you will see that the overwhelming majority of graduate students
> are Asian. Ten years ago they went to work for American companies.
> Now they are taking their newly acquired knowledge back home to teach
> in their own universities and start their own companies. The vast
> majority of entrepreneurial wealth will acrew to Asian companies.
>
>
> (2) Other than 'high tech' what businesses can small companies start
> today that creates wealth rather than just churns money? A new fast
> food restaurant chain? Hardly! High Tech is the answer and as per
> #1 above the majority of those companies will be stated elsewhere.
> (3) Common sense and hard work? Half of our population is an economic
> drain to our economy and the other half is taking the easy out by
> preparing themselves for careers in sociology and humanities. Is
> there any economic contribution coming from Social Workers and government
> employees? I don't think so.
>
> Yes, I agree that we are on the cusp of a new era of wealth growth.
> Unfortunately, it looks to me like the wealth will go to Asia not
> America.

May 12 11:59 AM

[Mark Anthony:]

Your argument is incorrect. It is true that 3.2 million kids will graduate from high school. Some of them will enter colleges but just to replace those who graduate this year. So overall there will be 3.2 million looking for a job.
But that is just part of the aging process of the youth growing up and the old growing older. 3.2 million is barely 1.1% of the population. There will likely be 3.5 million people also retiring in a normal year, making the job positions available.
So the fact that high school graduations happen by itself do not add to the unemployment statistics.

May 12 01:01 PM

[Applegator:]

Why stop with the 3.2 million high school grads? What are the employment prospects of college and graduate school graduates, who began their advanced educations between, say, 2002 and 2004? It's a different economy than they expected to find "out there in the real world". Career expectations these students nurished during their educational years have suddenly evaporated, unless they go into health care jobs or Dad's business.

Un- or under-employment await this group. Sadly, they will be the leading edge of disenchanted youth questioning the value of a college education. Who can blame them?

May 12 02:04 PM

[BigJake:]

I think the recovery will be "$" shaped.

May 12 02:45 PM

[Stephen Kanitz:]

Furthemore, these 3,2 have not lost a job, nor income, they will not reduce GDP, as the 13 million actually have. And those retired will continue to receive income, their pensions, so spending will go up, if part of those 3,2 get a job, which many will. Mark Anthony, your comment is on the mark.


On May 12 01:01 PM Mark Anthony wrote:

> Your argument is incorrect. It is true that 3.2 million kids will
> graduate from high school. Some of them will enter colleges but just
> to replace those who graduate this year. So overall there will be
> 3.2 million looking for a job.
> But that is just part of the aging process of the youth growing up
> and the old growing older. 3.2 million is barely 1.1% of the population.
> There will likely be 3.5 million people also retiring in a normal
> year, making the job positions available.
> So the fact that high school graduations happen by itself do not
> add to the unemployment statistics.

May 12 06:56 PM

[bogoMIPs:]

Looks like a ripe opportunity for Army recruiters, AF recruiters, Marine and Navy recruiters.

You figure with no jobs in sight, taking a 4 year look at Government employment with some additional educational prospects all paid for, I think our military will get bigger for awhile. Who knows, many might like it, and re-enlist and even make it a career. Thats great!

better than hanging out in Detroit!

May 12 07:34 PM

[buoy:]

Maybe if we get some of these illegals out of here, those kids can get a job.

May 12 07:59 PM