Monday, October 25, 2010

Jobless Recovery Turns "Green Shoots" into Tumbleweeds

I thought I would share another does of reality tonight.  I thought the most recent data from the Fed nicely summed up how bleak the jobs picture really is. 

Here is the latest mean duration of unemployment data from the Federal Reserve in St Louis:

As you can see below, the most recent numbers remain stubbornly high:

Date   2010-05   2010-06   2010-07   2010-08  2010-09

Value    34.4          35.2         34.2          33.6         33.3

My Take:

We are in uncharted waters when you compare mean duration of unemployment versus any other time in history since World War II.  As bad as things got in the 1970's and early '80's the unemployment duration was only half of what we are seeing now.

If we really were seeing a legitimate recovery the duration should be rapidly dropping off like it did in previous recessions(as seen above).

When you really take a hard look above you realize that we really never fully recovered from the tech bubble.  During the peak of the housing bubble unemployment duration remained high versus historical norms.

Today, it's a complete unmitigated disaster.  It takes the average person 8 months to find work after being let go.  In good times that number should be 2-3 months. 

Sadly, in all likelyhood, the people who did find work jobs are not making the money they did before.  Salaries drop when business is slower and you have several candidates from which to choose from.

Folks, without jobs housing cannot recover, and without housing the economy is in deep trouble. 

If this was a war we would find ourselves facing gunfire from all directions:

We are stuck in homes we cannot afford, we are losing our jobs when our mortgage is higher than it ever was in the past, and when we lose our jobs it's taking forever to find another one.

If things weren't bad enough we now have helicopter Ben and the Fed flushing the currency down the toilet which is forcing us to spend what little discretionary income(if there is any) we have left on essentials like food and oil.

If this were a war I would call it "Shock and Awe".  For once I think I know how the Iraqi army must have felt as they were overwhelmed from all angles. 


FXpropTrader said...

If there are more and more dollars, doesn't that mean real things, like houses will automatically start rising, even if unemployment rate stays stable?

Isn't it just a question of when?

And a second point: With so many men AND women in the job market the best thing to do is move in with a partner or share houses etc. That permits people to continue spending pretty much the way they were on food and other necessecities? That's why I think if you invest in companies with global reach and 'need-to-have' products, you'll make money even in these times? could be wrong of course :)

Jeff said...


There are more and more dollars but they are in the banks and they aren't lending them to people because people cannot qualify for loans like they once could.

Agree with you on commodity type names. Those should work. If people are moving in toigether you have to assume one or both are not working so this could hurt their spending habits:)