As everyone’s screaming today, the economy lost over half a million jobs. As the chart to the left shows, this is just the accelerating part of a long decline. Folks tend to look at the total number of jobs created, or the unemployment rate. Neither is, actually, very useful for telling you how good or bad the job market is.
What’s far more useful is the employment ratio – how much of the population has jobs? If that number is declining, odds are it’s getting harder to find, or keep a job. As you can see from the chart at the left, the peak of the last expansion, jobwise, was actually around November 2006. Since then, the trend has been down, down, down. In June 2008, a jerky decline fell of a cliff and started accelerating. This was primarily due to a combination of financial issues and the price of oil, which was between $125 and $140 a barrel for most of the month. The US economy cracks up when oil prices get that high.
Unfortunately, even though oil is now much lower (and will go even lower, probably breaking $30/barrel) that’s not enough. No one is lending, credit is tightening and the real economy is tanking. Low oil prices, while necessary, aren’t sufficient to turn things around.
Half a million jobs is, well, a lot of jobs. Every sector except health care and mining lost jobs and I’d expect both of them to start bleeding soon. Obama is talking about a stimulus that creates 2.5 million jobs over two years. As you can see, that isn’t going to cut it.
Especially because this won’t be the worst month. I fully expect January’s numbers to be even worse, as a ton of retailers close their doors. That will echo through the economy in months to come.
Congress, lame duck or not, needs to get off its butt and enact a large stimulus bill next week – spend a couple hundred billion over 2 months. Nothing long term, all direct stimulus which will be spent immediately. It also needs to save the Big 3. Give them a bridge loan, nationalize them, or whatever, but the economy cannot afford to lose another two or three million jobs.
Remember, this sort of collapse is self reinforcing. The more people who lose jobs, the less money gets spent, which means more businesses have to let people go, which means even less money being spent, which means… well, I assume you get the picture.
Obama will also need to consider a much larger stimulus than he has been planning. 350 billion a year is not going to cut it. At this point we are in danger of sliding from a very bad recession into a depression. Failing to save the Big 3 will cause a depression. Failing to engage in a large enough stimulus will do the same thing.