Jobless Recovery Impossible

by: Harold Fredrick

Many respected financial pundits refer to this period of economic history as a “jobless recovery”. Many more refer to unemployment as a “lagging indicator”. While it is true that the US economy has escaped past recessions while carrying relatively high levels of unemployment, the current unemployment situation is so dire that no recovery of any significance can take place until unemployment rates are substantially lowered.

As of Q2 2011, the BLS reported 14 million unemployed, 12 million underemployed, and 2 million “marginally attached” workers (unemployed who either exhausted their benefits, were ineligible to draw unemployment insurance, or stopped looking for work). The median annual income of those displaced workers was significantly lower than the $44,980 median annual income of full-time workers.

According to the US Census Bureau and a report published by MSN Money, the unemployed drew a median $15,340 in annual benefits, the underemployed earned a median annual income of $16,500, and the marginally attached earned nothing.


The amount of wages the unemployed, underemployed, and marginally attached lost is staggering. If they had worked full-time at the median annual salary, the 28 million displaced workers would have earned $1.25944 trillion in the period Q2 2010 - Q2 2011.

However, drawing the median in annual benefits and part-time salaries, the unemployed, underemployed, and marginally attached earned just $412.76 billion. The displaced workers therefore forwent $846.68 billion in wages, or approximately 6% of nominal GDP.

Key metrics:

  • Median income, full-time workers: $44,980
  • Unemployed workers: 14 million
  • Median income, unemployed workers: $15,340
  • Underemployed workers: 12 million
  • Median income, underemployed workers: $16,500
  • Marginally attached workers: 2 million
  • Median income, marginally attached workers: $0
  • Potential annual earnings, displaced workers: $1.25944 trillion
  • Actual annual earnings, displaced workers: $412.76 billion
  • Lost annual income, displaced workers: $846.68 billion

The 28 million displaced workers in this country essentially lost $846.68 billion in consumer purchasing power during the period Q2 2010 - Q2 2011. With an economy that is 60-70% consumer spending, the US cannot escape its current economic malaise until the unemployed, underemployed, and marginally attached start working full-time again.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.