10.2% Unemployment Rate Confirms New Great Depression
Posted by Michael A. Kamperman on November 6, 2009
This October the official unemployment rate rose to 10.2% and the true U-6 unemployment rate that includes discouraged workers and those forced to work part-time rose to 17.5%. Anyone that is still in denial that we are in a New Great Depression is like an Ostrich with their head in the sand. In October the teen retailers reported much worse than expected sales numbers. The conventional wisdom explanation is that because Halloween fell on Saturday the teens didn’t shop at the end of the month. I guess it was a who-knew surprise to retail analysts that Halloween fell on Saturday. The real reason the teens cut back on shopping is because they and their parents are unemployed. Many adults have been forced to take the traditional part-time jobs normally held by kids. These are the people now counted in the U-6 number. Despite the stimulus bill focused on state and local governments there were zero government jobs created in the last month. Importantly hours worked again remained unchanged at the very low level of 33 hours. The mantra that many keep repeating is that unemployment is a lagging indicator. While unemployment was a lagging indicator in the last two milder recessions, it did not lag the recovery after the deep recessions of the mid 1970’s and early 1980’s. The current economic decline is already deeper than those two recessions.
These numbers are shocking and were not predicted by the econometric forecasting models relied on by Wall Street and Washington. Don’t forget the worst case assumption used by the federal government to stress test the banks assumed unemployment would peak at 10.3% by the end of 2010. Can there be any doubt that the worst case is going to be a lot worse than that? If these leaders would drive back and forth from New York to Washington rather than snooze on the express train or the plane they would have to drive through New Jersey. New Jersey, like the rest of America, is hurting and the reason Governor Corzine lost his re-election bid is directly attributable to the lack of available jobs.
What the rising unemployment rate is telling us is credit remains extremely tight for both small businesses and consumers. Without access to credit the small business jobs engine is sputtering. Without access to credit the consumer spending so many businesses rely on is still retrenching. Hopefully this unemployment number will serve as a wake-up call to the Whitehouse and the Congress that the economy needs a lot more help from Washington. President Obama wants to solve the jobs crisis on the fiscal and political cheap. He is looking for ideas to create jobs that won’t raise the deficit. One plan touted by the Whitehouse is to get those businesses that export to only one country to increase exports by exporting to two countries. Have these Harvard geniuses not figured out most businesses exporting to only one country are located on either the northern or southern border and trade with either Canada or Mexico? President Obama, the time has come for you to put forward a real trillion dollar plus jobs plan and to put all of your remaining political capital on the line to defend it. Otherwise come 2012 you also will wind up being tossed out of office.
