In the bizarro world of financial markets, our narrowly measured unemployment rate rose above 10% in the month of October and now the markets have inched higher. 

I did see a couple of people taking solace in the fact that the number of job losses is slowing, indicating that on the current slope we will be in positive territory by late spring of 2010.  I understand that.  I don’t agree with it, but I understand it.  The measure of the civilian labor force, or the number of people eligible for work, has continued to slide, which makes the measure of unemployment look better than it actually is.  We’ll see.

There is no good way to spin a move higher that goes over 10%. 

The above title was for an article written in the WSJ, October 20, 2009.

This is a topic we have been harping on for a long time.  Earnings are beating forecasts, but in general (excluding Apple) they are far below previous years.  Even then, those earnings were notched by reducing costs, which is a nice way of saying “firing people.”  This is nothing new, so I won’t spend a lot of time on it; I just want to make sure that we are keeping our eye on the ball here.

What is new, or rather what is subtle, is the change that is happening before our eyes.  For more than 20 years we have been talking about the change in consumption that would happen as our largest cohort (boomers) passed the age of peak spending.  We tried many times to paint a picture of what that world might look like.  In my mind, we always fell short.  Readers and listeners were always left with the impression that everything goes down, and must decline in a straight line.  It doesn’t happen, and isn’t happening, that way. 

What we’ve done is lower consumption, that much is true.  We have also changed what we consume.  Gone are the big ticket items that scream financial success (bigger, newer cars, for example), but also require a lot of financing.  It might not feel like it to the individual, but the minute we stop using debt to finance, we cut off one of the main sources of lifeblood to the economy.  We might still spend close to every nickel we have.  We might continue to eat out and buy new clothes. Without the turbo-charged effects of credit, the economy will still soften.  If we actually add savings on a continued basis, the effects are even greater.

The outcome remains the same - unemployment.  Which is the premise of separate but related article in the Journal today, “Firms Keep the Brakes on Hiring“  (the title is a little different online than in print).  Why wouldn’t they?  Demand has not returned, no matter what the MSM says.  Our current measure of hours worked in a week in the US is 33, the lowest on record (since the 60s).  When business picks up modestly there is no need to hire more people, just increase hours worked a little bit.

Less demand, less employment, the same or rising expenses (cost of living, debt payments, etc.).  This is not a recipe for a quick recovery. 

We try to keep this blog fairly apolitical — our beat at HS Dent is economics, not politics — but sometimes you just can’t help yourself.  A politician will say something so incredibly irritating that you feel an obligation to call them out. Whenever I hear a politician speak of “creating” or “saving” jobs, I get this little muscle spasm in my right shoulder and I feel my blood pressure rise.  When I hear them actually attempt to quantify this absurd claim with numbers — “Our administration created 150,000 new jobs…” — I feel an urge to break something.   Read the rest of this entry »

On the New York Times website, David Leonhardt published an excellent interactive map that diagrams the change in unemployement rate county by county.  There are also “break out” maps that focus on three subsets: regions that were already weak before the recession began, regions that had the biggest housing booms, and regions that are manufacturing centers.  Click on the map below to link to the New York Times site, or follow this link.