Unemployment Above 10%

The unemployment rate hit 10.2% today, topping the 10% mark for the first time since June 1983. Economists are generally expecting the rate to go higher before it goes lower. Back in September 1982 when the unemployment rate moved above 10% for the first time in the post-WWII era, the rate remained above 10% for 10 months and hit a peak of 10.8% in November and December of 1982.

With the Dow opening lower today by about 50 points only to close up by about 20 points, investors didn't seem too worried about the move above 10% in unemployment. And they didn't seem too worried about it 27 years ago either. In fact, the S&P 500 went from about 120 to 170 (+40%) throughout the period of 10%+ unemployment from September '82 to June '83.

Comments

[Moon Kil Woong:]

The market will worry about it when they see the government spending spree ending sometime next year. That is providing they don't make an even bigger one to replace it with.

As for the real economy, it continues to be subsumed by the public sector which inevitably becomes a cost and burden on the economy. Thus we could be looking at double digit unemployment and no real recovery for at least another year regardless of how high the stock market rises and how low the Federal Reserve is willing to devalue the dollar to make it look like we have growth (a positive GDP seems to be their only goal no matter the cost).

All in all, a bad showing by the US. While the EU ends QE the US seems more addicted than ever to fake money and jobless economic expansion.

Nov 07 01:01 AM

[Mayascribe:]

Moon: I have no idea if you stop back and read the surf, but I wholeheartedly agree with you. I'm riding this pseudo wave, and have been for months. About nine days or so ago, I took my e-gamer account to about 75% cash. Did not like the metrics, so, hence forth, I day traded, for the most part with success. Yet, the metrics defy logic. Stock market continues to surge. I'm back in, full force. Right now is a stock picker's day trader's dream.

How crazy and maddening it is that a strong dollar wastes the stock market? Why has the "game" become destroy the dollar and make money?

You know why as well as I know why. And yet, the makers of policy are clueless.

Nov 07 01:41 AM

[chris coonan:]

I went to the Bureau of Labor Statistics website to find unemployment figures for Architects (those that design buildings) and the stats shown there were so obviously wrong that I lost any confidence in BLS. I have heard that the Unemployment/Underempl... rate among Architects is about 50%, which is logical, given that almost all Development is on hold in the US. The Q3 2009 figure shows 9 percent, actually under the National Average for all fields.....

I can only imagine that the BLS must be measuring a subgroup, like Eskimos with one arm as registered Architects.....if this statistic is so far out of reality for one profession I can imagine the real unemployment rate is more like 25%. Tax revenues will likely prove BLS was smoking grass next year.

Nov 07 05:39 AM

[tripleblack:]

Productivity gains outmuscled the unemployment numbers, this time.

America's workers are panting along in sprint mode. Having already run the marathon to get through "the emergency", now they are being whipped to do even more...

A limit has, imo, been reached. The long list of reasons why such sprints cannot be maintained for very long are in place in American businesses everwhere... Exhaustion (physical, psychic and mental) - fudged numbers concealing a drop in productivity or other serious problems (which house of cards will collapse at the first serious examination) - errors piling up that are not being addressed or even recognized in the panting rush to keep sprinting on the productivity treadmill.

Any good industrial engineer knows that 200% effort levels are both unsafe and unsustainable.

"Unsustainable"...

Now THERE'S a term we are hearing a lot.

Nov 07 07:44 AM

[berated:]

That appears to be a pretty compelling connection between the S&P growth and high unemployment and gives hope that we'll see something similar in the future. However, a few questions about "then & now" occur to my financially naive mind:

- how available was credit back then?
- what was the ratio of mfg to service sectors back then?
- what was the cost of raw materials back then?
- what was the ratio of our debt to GDP back then?
- were we in an inflationary or deflationary environment back then?
- how much exposure / uncertainty existed in financial sector re derivatives back then?

There are more questions to be sure, but you get the point. We'd need a lot more data before we can make educated guesses about the future (and even then, it may not matter due to the "New Normal").

Nov 07 07:57 AM

[User 353732:]

1. Productivity gains can be and are of 4 kinds:
replace people with embedded technology but this requires capital and at time when Big Business is hoarding cash and small/new business is denied credit it seems that this kind of gain is the exception in 2009

fire workers and tell the rest to do more for the same or less total compensation with benefit growth being offset ,mostly, by wage stagnation or reduction and bonus elimination: apparently this is how much of Big Business is increasing quarterly profits with declining revenues
: this is sustainable as long as jobs are still being lost at the rate of at least 7,000 a day; fear will increase performance for several quarters and then it will become counterproductive

just steal more money from taxpayers and clients which increases "productivity" per employee and certainly leads to a spectacular increase in profits since large scale theft with no increase in cost is very lucrative indeed:
this is the Wall St way and is a defining trope of the current US Regime

Improve business processes, stop doing things that have negative or zero value added, introduce innovative goods and services while simultaneously doing the work with fewer people. To institutionalize the gains from productivity allow employees to share in these gains:
this is the traditional, sustainable, way of increasing productivity and it is what scores of thousands of small and new businesses are doing.

2. As long as Big Govt continues to expand in scope and scale , Wall St continues to steal from Main St and the MSM continues to be a propaganda machine, fear will continue to be ascendant on Main St and within the entrepreneurial Middle class. As long as fear is ascendant, jobs will continue to vanish.

Big Govt can neither "save nor create" real jobs. It can only inhibit and destroy them. The bigger and longer the "stimulus" the greater and more persistent will be high unemployment and underemployment.

Nov 07 08:24 AM

[tripleblack:]

Good logic, and I would comment only that much of the available technological improvements have long been done (not all, but that would support your stand in #1 on your list), and that the point of diminishing returns in that area has arrived.

Obviously, I too believe that squeezing the workerforce is resulting in the current bump up in productivity. We should keep in mind that we are looking at productivity gains all out of proportion to those seen in the American markets for a very long time (more in line with those seen in third world countries when they first start building roads).

I like your logic in general on this topic. It tracks for me.


On Nov 07 08:24 AM User 353732 wrote:

> 1. Productivity gains can be and are of 4 kinds:
> replace people with embedded technology but this requires capital
> and at time when Big Business is hoarding cash and small/new business
> is denied credit it seems that this kind of gain is the exception
> in 2009
>
> fire workers and tell the rest to do more for the same or less total
> compensation with benefit growth being offset ,mostly, by wage stagnation
> or reduction and bonus elimination: apparently this is how much of
> Big Business is increasing quarterly profits with declining revenues
>
> : this is sustainable as long as jobs are still being lost at the
> rate of at least 7,000 a day; fear will increase performance for
> several quarters and then it will become counterproductive
>
> just steal more money from taxpayers and clients which increases
> "productivity" per employee and certainly leads to a spectacular
> increase in profits since large scale theft with no increase in cost
> is very lucrative indeed:
> this is the Wall St way and is a defining trope of the current US
> Regime
>
> Improve business processes, stop doing things that have negative
> or zero value added, introduce innovative goods and services while
> simultaneously doing the work with fewer people. To institutionalize
> the gains from productivity allow employees to share in these gains:
>
> this is the traditional, sustainable, way of increasing productivity
> and it is what scores of thousands of small and new businesses are
> doing.
>
> 2. As long as Big Govt continues to expand in scope and scale , Wall
> St continues to steal from Main St and the MSM continues to be a
> propaganda machine, fear will continue to be ascendant on Main St
> and within the entrepreneurial Middle class. As long as fear is ascendant,
> jobs will continue to vanish.
>
> Big Govt can neither "save nor create" real jobs. It can only inhibit
> and destroy them. The bigger and longer the "stimulus" the greater
> and more persistent will be high unemployment and underemployment.

Nov 07 08:37 AM

[Income Tax:]

Author is genius. I am not sure if all fund managers pitch their idea like this. What he forgot to mention, not sure intentionally or by accident, is that, the market is only up 10% at Oct 82 from the bottom

finance.yahoo.com/q/hp?s=^GSPC&a=00&b=...

Amazing, how you can clip sth. and show different fact/opinion?

Nov 07 11:29 AM

[Dave Wrixon:]

I think in many instances it is run things until the wheels fall of. Companies in trouble cut down on essential maintenance they take chances, they stop providing essential training and thick sweat their assets until the pips squeak. Does this mean these companies are moving forward into a bright new future or are they just flat out but burning vapor?


On Nov 07 08:24 AM User 353732 wrote:

> 1. Productivity gains can be and are of 4 kinds:
> replace people with embedded technology but this requires capital
> and at time when Big Business is hoarding cash and small/new business
> is denied credit it seems that this kind of gain is the exception
> in 2009
>
> fire workers and tell the rest to do more for the same or less total
> compensation with benefit growth being offset ,mostly, by wage stagnation
> or reduction and bonus elimination: apparently this is how much of
> Big Business is increasing quarterly profits with declining revenues
>
> : this is sustainable as long as jobs are still being lost at the
> rate of at least 7,000 a day; fear will increase performance for
> several quarters and then it will become counterproductive
>
> just steal more money from taxpayers and clients which increases
> "productivity" per employee and certainly leads to a spectacular
> increase in profits since large scale theft with no increase in cost
> is very lucrative indeed:
> this is the Wall St way and is a defining trope of the current US
> Regime
>
> Improve business processes, stop doing things that have negative
> or zero value added, introduce innovative goods and services while
> simultaneously doing the work with fewer people. To institutionalize
> the gains from productivity allow employees to share in these gains:
>
> this is the traditional, sustainable, way of increasing productivity
> and it is what scores of thousands of small and new businesses are
> doing.
>
> 2. As long as Big Govt continues to expand in scope and scale , Wall
> St continues to steal from Main St and the MSM continues to be a
> propaganda machine, fear will continue to be ascendant on Main St
> and within the entrepreneurial Middle class. As long as fear is
> ascendant, jobs will continue to vanish.
>
> Big Govt can neither "save nor create" real jobs. It can only inhibit
> and destroy them. The bigger and longer the "stimulus" the greater
> and more persistent will be high unemployment and underemployment.

Nov 07 12:59 PM

[Dave Wrixon:]

On Nov 07 12:59 PM Dave Wrixon wrote:

> I think in many instances it is run things until the wheels fall
> of. Companies in trouble cut down on essential maintenance they take
> chances, they stop providing essential training and thick sweat their
> assets until the pips squeak, new projects and product development go out the window. Does this mean these companies are
> moving forward into a bright new future or are they just flat out
> but burning vapor?

Nov 07 01:01 PM

[moneyagent:]

Wow guys its 18+% who are you trying to kid? Oh yeah only count a certain number that you choose to look at oops I forgot how you works.

Nov 07 01:48 PM

[untrusting ...:]

Hmmmm, Bespoke picks one data point, unemployment over 10% in 1982 and compares it to a 40% rise in stock prices after that. The hidden implication being 2009 stock prices could do something similar with unemployment now over 10%.

A pretty misleading implication for a lot of reasons such as:
1) PE10 ratios (see dshort.com) - In 1982 PE10 ratios were about 6 or 7, indicating stocks were historically undervalued at the time of the 40% price increase in 1982. In 2009 PE10 ratios are well in excess of 18, indicating stocks are historically substantially overvalued at this point.
2) Debt - in 1982 debt levels, both private and public were substantially less. In 2009 debt levels, both private and public are reaching historic highs.
3) Interest rates - Back in 1982 interest rates were at near historic highs, like 15+%, with nowhere but down to go. Today in 2009, interest rates are at historic lows, near 0% for some, with nowhere to go but up

All in all the economic conditions in 1982 and 2009 are nowhere near comparable on many many important levels. Thus we find the article very misleading in the implied relationship show.

Nov 07 05:04 PM

[Income Tax:]

to untrusting...

I have pointed out, even technically, the Oct. 1982 starting point, is only 10% above low... We are now 60% over lows. How convenient?

Nov 07 06:53 PM

[MarkitWacha:]

I'm interested in the oil markets. 10.2% unemployment and $80/bbl oil. wow.

What will happen when unemployment gets to 7% and oil to $120/bbl?

I know-- the fudged numbers of the CPI will tick down by .1% so that the government won't have to pay more social security.

Nov 07 08:14 PM