So the latest economic news is encouraging - sort of. The unemployment rate announced today was 9.4%. The number of jobs lost in the previous month was the fewest jobs lost since August 2008. This is also good because a lot of pundits and economists were predicting that it would be over 10% by now. A friend of my family's is a labor economist at a major research university who told us at a Christmas party that she expected unemployment to hit 15% before all was said and done with this recession. That was before the stimulus bill though.
But don't celebrate the end of the recession just yet. There are still more jobs being lost than being created. But the unemployment rate is measured in the US in a way that doesn't count people who have been unemployed for a long time. So this is good news but the slight drop in unemployment rate is probably being driven by people dropping out of the denominator rather than better numbers in the numerator.
Here is a chart comparing the unemployment rates related to other post-WWII recessions. If we are in a 1973 pattern, then this could be the bottom. That would be good news. But you can see that there have been "double dip" patterns before and even recessions (like the 1969 recession) in which unemployment got bad and stayed bad for a long time.
4 comments:
Another possibility, that's being talked about a lot here, is that the unemployment numbers look good because they don't take account of people who have had their hours & pay dropped - basically forced into part-time rather than full-time work - because they have retained their jobs. Also, it's being said that a lot of the jobs that are being created are only part-time now, whereas they may have been full-time a year ago.
So, it seems that here at least, the amount of money going into employees/consumers/voters pockets is less than this time last year. Which is ok for the economy in general at the moment, because interest rates are also low, so any of those newly part-time workers who own homes are still able to make the repayments. That may well change a bit as interest rates go back up though.
Yeah, the under-employment rate is probably very high right now.
For all the reasons why we should not read too much into the drop in the unemployment rate, it is still an incredibly good sign. No matter what you think lies behind the numbers, we recall that (1) unemployment is a lagging indicator of growth and (2) Unemployment was expected to peak over 10% in August and September.
That psychological 10% number is now less likely. Combined with the fact that the GDP shrank only by 1% in the 2d quarter, whereas it shrank 6% in the 1st quarter. I suspect the GDP started growing in June (probably down 3% in April, up in June). In fact, we are likely to see the end of the third quarter (Sept 30) with good news: unemployment starting to drop slowly and GDP growth for the 3rd quarter, plus the Dow back over 10,000. This will increase optimism, increase the president's popularity, and reduce the size of projected deficits just in time for the Health Care votes in both houses in early October.
What's more, the stimulus package is just beginning to kick in. I also am starting to see more interest in legal jobs picking up, fyi.
The increasing need for lawyers is very good news. Work for lawyers means companies are doing business again.
I agree with LTG that we are probably at or near the bottom. We are probably in the 1973 type pattern of recession. The overall "vibe" certainly reminds me of 1973.
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