Nearly 600,000 Jobs Lost in a Week

January 22, 2009

The Labor Department reported today that nearly 600,000 people filed for unemployment last week.  That’s an annual rate of over 30 million workers losing their jobs – over 20% of the work force. 

I thought you might be interested in some anecdotes from the state of Michigan.  It was reported yesterday that in one month, from November to December, unemployment in Michigan rose by a full percentage point to 10.6%.  And it seems that the unemployment offices have been completely overwhelmed.  Phone lines are jammed.  The web site has crashed from overuse.  People are forced to take their questions directly to the unemployment office.  The local news showed a line at one such office that appeared to stretch for a full city block.  I’m reminded of pictures of the unemployed waiting in lines during the Great Depression.  And many of these are highly skilled people.  One guy interviewed had two master’s degrees and worked in an IT department.  Yet, some politicians still offer up “job retraining” as the solution.  Retraining to do what?  Where is the huge demand for labor that’s going unmet because Americans are too uneducated to fill the positions?  The only retraining needed around here is how to fill out unemployment application forms. 

I’m also reminded of a visit to Michigan by Mitt Romney during the Republican primary campaign.  He told Michiganders condescendingly that we’re in a “one-state recession.”  Well, it isn’t a one-state recession any more, is it?  It makes you wonder whether the state of Michigan is the canary in the coal mine for the U.S. economy.  If we are, the rest of you had better hunker down because it’s going to get much, much worse!

7.2% Unemployment, And Rising Fast

January 12, 2009

Unless you’ve been cut off from civilization since Friday morning, you’ve probably already watched and read countless stories of the news reported in this linked article, that the economy shed another 524,000 jobs in December, raising the unemployment level from 6.7 to 7.2%.  So my purpose in writing this post is not so much to inform as to provide some additional commentary from a perspective missed by the mainstream media. 

But first, since I’ve been maintaining a running tally for 2008, it’s appropriate to close the book by observing that a total of 2.6 million jobs were lost in 2008.  And 1.8 million new workers entered the labor force during the same time, thanks mostly to immigration but also due to young workers entering the labor force faster than older ones retire.  Thus, our economy actually came up short by4.4 million jobs in 2008, which is about 2.9% of the labor force. 

At least one analyst has forecast that we could begin seeing job losses of one million per month.  More economists are acknowledging that the economy is far worse than they realized, using terms like “deepening” and “severe recession.”  Friday, Dr. Peter Morici, economics professor at the Univeristy of Maryland, was probably the first to assert that we have actually entered a depression, noting that a recession is self-correcting while the current economy, without massive intervention, is doomed to spiral out of control. 

When I made my 2009 predictions back in November, including such things as a trillion dollar stimulus package and 10% unemployment, at least one reader called them “far-fetched.”  In only two short months, not only do such things not seem far-fetched, they are beginning to look conservative.  I’m beginning to think things could actually get much worse. 

As the economic crisis has evolved, analysts have made comparisons to earlier recessions, but the comparisons are steadily moving backward in time.  At first, conditions were the worst since some time earlier in the decade, like following 9/11.  Then it was the recession of the early ’90s.  Then the early ’80s or the ’70s.  Now we’re beginning to see the specter of the Great Depression. 

The U.S. economy slipped into recession in December 2007 and the 12-month downward spiral is already the longest since the early 198Os. If it lasts more than 16 months, it will be the longest recession since the Great Depression.

“We expect the jobs hemorrhage to continue through much of 2009,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

“The current pace of job losses means that the unemployment rate will rise into the 9 percent to 9.5 percent range — at a minimum — before leveling off.”

The collapse of the U.S. housing market triggered the worst financial crisis since the 1930s, and businesses and consumers alike have retrenched, with shock waves spreading worldwide.

This financial crisis was not triggered by the collapse of the housing market.  It’s no more valid to stop the backward retracing of the chain of events with the housing market collapse than it would be to stop with the collapse of AIG.  Why did the housing market collapse?  Because people couldn’t afford to pay their mortgages.  Why?  Because their low incomes made them ineligible for traditional loan terms.  Why are their incomes low and declining?  Because trade policies have exported more and more jobs, leaving labor in a state of over-supply.  Ahhhh, now we’re getting somewhere. 

And the unemployment situation is even worse than the headline numbers would have you believe:

More worryingly, the number of people working part-time for economic reasons reached 8 million in December, up from an already high 7.3 million, and the labor underutilization rate, which includes discouraged job seekers, jumped to 13.5 percent from 12.6 percent.

Not surprising when weekly first-time jobless claims are now consistently above 500,000, an annual rate of 26 million workers or 17% of the labor force. 

In light of these conditions, isn’t it time to consider that economists really don’t know what the hell they’re talking about?  Oh, they know a lot about economics, a field akin to contemplating one’s navel, in which each knows the other’s theory and all of the arguments for and against them, and they debate them endlessly.  But all of it has little relevance to what’s happening in the real world.  I once heard economists described as people who are good with numbers, but don’t have the personality to be accountants.  I’m afraid it’s not true.  They’re not even good with numbers.  They can’t handle the rigorous addition and subtraction required to maintain a balance sheet.  If they could, who among them would be advocates of a perpetual trade deficit? 

It’s time to look elsewhere for answers.  There are very logical reasons for our economic demise and equally logical remedies.  If you’re a new visitor to the site, may I suggest that this site and my book, Five Short Blasts, would be a good place to start?

Weekly Jobless Claims Soar Again

December 11, 2008

Weekly jobless claims have soared again to 573,000.  That’s an annual rate of almost 30 million workers, or 22% of the labor force, losing their jobs every year!  The pace of these layoffs is breathtaking and accelerating at the very time of year when job gains are usually their strongest. 

It’s worth noting that, at the peak of the Great Depression in 1933, unemployment reached 25%.  While our official unemployment rate is currently only 6.7%, the way that figure is calculated has been revised many times since  1933, making the data appear better than it is.  Many economists point out that, if we include everyone who is looking for work, has given up looking, or has taken part-time jobs for lack of anything better, unemployment is actually more like 12-13%.  And it’s climbing fast.

This data is a very bad sign that the economy is deteriorating rapidly and that the unthinkable – a depression – is becoming a stronger possibility with each passing day.

516,000 More Casualties of the Economic Collision

November 14, 2008

I can’t let yesterday’s release of the weekly jobless claims figure pass without comment. The Labor Department announced that first-time jobless claims rose to 516,000 last week, the worst figure since 9/11 in 2001. That’s an annual rate of almost 18% of the labor force losing their jobs every year, a big jump from the previous week. And all forecasts are that it’s going to get worse.

So add another 516,000 to the list of casualties of the Economic Collision I warned of in Five Short Blasts, the collision between falling per capita consumption and rising productivity, brought on by overcrowding and overpopulation, and accelerated by free trade with grossly overpopulated nations. Anyone not affected yet had better fasten their seat belts!


Effects of the Collision Mounting Rapidly

October 5, 2008

The effects of the collision that I warned of with Five Short Blasts, rising unemployment and poverty, are really starting to be felt now. Friday the Labor Department reported a loss of another 159,000 jobs. Added to the 605,000 already lost this year, the total is now up to 764,000. And, as I’ve pointed out each month, our labor force grows by about 150,000 each month, thanks to rampant population growth fueled primarily by an extremely high rate of legal immigration. So the shortfall of jobs since the beginning of the year now totals 2,114,000 jobs.

Never mind the “official” unemployment rate of 6.1%. On Thursday it was reported that 497,000 workers filed for unemployment last week, and the rate is rising rapidly. Annualized, that’s a rate of nearly 26 million workers losing their jobs every year – about 17% of the work force!

I have been raising alarm about the trade deficit for many years, asking what will happen when the supply of American assets available for sell-off to fund the deficit begins to dwindle. That day will bring the economy to a screeching halt as foreign credit dries up. Well, that day is rapidly approaching. Credit is drying up and it’s shutting down the economy. Forget about the bail-out package. It won’t do a damn thing to rectify this situation. Hunker down, folks. It’s going to get really bad.  

Today’s Financial / Business Data: Predictable

July 17, 2008

Some interesting economic data was released this morning. First of all, housing starts rose unexpectedly, from an annualized rate of 975,000 in May to 1,066,000 in June. However, the increase was led by a 42.5% surge in multi-family dwellings, against a backdrop of a 5.3% decline in single family homes. This is a clear indication of the theory presented in Five Short Blasts at work. As the population continues to grow, people are moving toward smaller, multi-family dwellings. In other words, the per capita consumption of dwelling space is declining, just as Figure 5-2 on page 88 predicts.

Separately, the Labor Department reported that weekly first time jobless claims rose again last week to 366,000. This is an annualized rate of 19 million, or about 13% of the labor force. In other words, one out of ever 8.5 workers will file for unemployment in the coming year if this rate doesn’t rise further. But it’s been on the rise for a year now.

Finally, the Philadelphia Fed Survey of manufacturing shows that manufacturing activity in that region continues to decline, belying claims that manufacturing would rebound with the falling dollar as exports become cheaper and more attractive to foreign buyers. This runs counter to economists’ predictions of a rebound because our trade deficit has nothing (or very little) to do with currency valuations. (See previous posts on this subject.)

Falling per capita consumption of dwelling space, rising unemployment and shrinking manufacturing – none of this is any surprise to someone who understands the theory presented in Five Short Blasts.

Confirmation That Unemployment is Worse Than Stated?

February 8, 2008

This article finds that 18% of vets leaving the military can’t find work, even if they take advantage of the GI bill and get more education. 

A few posts back, I suggested that the government tinkers with the unemployment calculation to make it appear better than it is, and I noted that first-time jobless claims run at an annual rate of 13%.  This article seems to confirm that, in fact, unemployment is probably much higher than the current “official” rate of 4.9%. 

“The 2007 study by the consulting firm Abt Associates Inc. found that 18% of the veterans who sought jobs within one to three years of discharge were unemployed, while one out of four who did find jobs earned less than $21,840 a year. Many had taken advantage of government programs such as the GI Bill to boost job prospects, but there was little evidence that education benefits yielded higher pay or better advancement.

The report blamed the poor prospects partly on inadequate job networks and lack of mentors…”

These statistics too closely resemble the general population to be blamed on their military background.  How many people in the overall work force have “job networks” or “mentors?”  One out of four earns less than $21,840 per year?  That’s about the same as the overall population.