Tweet
November 2008 Population/Employment Ratio
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.
66 Comments
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Thanks for the late Friday afternoon cheer…
Ughhh!
*oof* That’s a precipitous drop…!
here’s what I don’t understand ian;
why don’t we just take the funds for the bailout and use them to directly loan, ie small business, ie the auto industry, ie whoever wants the loan and has a hard asset the loan is being used for.
I cannot figure out why we need the middle man overhead known as “the banking industry” especially since they aren’t loaning the money we gave them to laon
I totally agree with your asessment of what is going to happen right after the first of the year.
It is going to be ugly.
one of the mistakes fdr made was he was “nearly too cautious”
like fdr, obama does not have the luxery of caution, he must be bold, he must put people to work and he must build for the future
being bold will be cautious for obama, being timid is actually much more dangerous then being bold
counter intuitive but there it is
Of course, right after that the commercial real estate ballon is going to burst too.
Then it is hold on tight.
obama is already saying things oposite of the actions he needs to take, he is saying things like “we are going to have to cut programs in these times” when that’s exactly what he should NOT be doing UNLESS he is intending on giving those people BETTER jobs when he cuts the program
and then what is the purpose of cutting the program in the first place?
I know a doctor who got a tax-deductible Huge Tank, the ones that cost $50,000+ and get 3 mpg. It was a tax write-off, he bragged. I could’t believe it. True, though. Vehicles over a certain weight were just about given away if the buyer was rich enough to write it off.
So why can’t we do that now, only make the weight requirement small and the mpg very high?
You could either get your Earned Income Credit, or a new car, how about that?
There isn’t enough money in the world that would make me want to be the next prez. Going to difficult to climb out of this hole.
that would be a great idea as far as I am concerned, I would also limit the deduction to people who earn less then a certain amount…just as deductions are used for people who earn more then a certain amount.
I would take a dollar a year just so I could jail cheney, rove, bush…in that order I might add
Thanks Ian.
digg
then I might retire and let my vice president take it from there
I posted this before a few threads down.. I’ll post it again here: shrub’s sclerotic employment record has seen a cumulative annual rate of growth of about 0.46% since he took office 8 years ago, with a heavy tilt toward McJobs. During the same period, the US population grew at an annualized rate of 0.82%, so, in real terms, his net contribution to jobs is negative.
If we lose any additional 2 million jobs by the time he leaves office on Jan 20, and, no, I’m afraid that’s not impossible or even improbable, his cumulative annual rate of employment growth will be 0.28%!
Worst president ever. At least Laura will be able to hire lots of servants cheaply for the new family McMansion in Dallas.
you think?
that includes the “great depression”
hey, for what it’s worth, I saw a study recently that suggested the high school graduation rate actually declined by a little over 6% over his 8 year tenure too… so not only are we less employed, we’re less prepared to be employed. shrub, for one, welcomes our new Chinese masters ;-P
Got a laugh out of the fact that their garage is larger than my condo. At least the house is large enough that Laura can get away from him.
I still say print more money an’ give it t’ people t’spend.
The Republicans in Congress seem to have one main purpose in life:
Make sure Obama gets NO silk purses.
Make sure that he only gets sow’s ears, and nothing but sow’s ears.
Then sit back and criticize him for 2 years, and clobber every sow’s ear that starts to look like a silk purse.
We’ll see how much Obama likes the “non-partisan” approach, and “reaching across the aisle.” I give him maybe 6 months. Then Obama will have to decide whether to cave in, or fight.
Bob in HI
We are ready to go into a depression. Fixing the mortgage debacle needs to happen but is no longer the #1 priority (10% of all mortgages now in default) Put a freeze on foreclosures now. A stimulus in this environment will not go into new spending to generate anything. It will pay down debt and/or go under the mattress.
A fix is going to take bold action.
1. Raise the minimum wage to where it is something that can be survived on and that is for a
2. 32 hour work week.
3. provide assistance to employers to cover costs.
This will spread remaining jobs among many more, increase level of confidence as things improve, increase spending and it will cause inflation!
At the present time we are seeing deflation in housing and autos and it is spreading.
They’re currently doing that, almost. They are loaning to the commercial paper market, because no one else will. That just started, we’ll see how much effect it has. For direct consumer loaning they may have to cut out the middlemen, since no matter how much money you give the banks, they still raise interest rates and cut lines of credit and credit limits and cards.
You can do this two ways – you can use banks taken over by the FDIC, or you can just do it direct. How’d you like a platinum Fed card?
There’s always fat that can be cut. Get rid of things like defense appropriations, shipping money to Kansas for “homeland security”, etc… If you spend this money on other things you’ll get far more stimulus. I’m not worried about Obama cutting — if he cuts the right things. That’s the question.
for a reprise of the 1930’s to happen, the economy would have to reach equilibrium at well below full employment. There is, however gloomy the current environment seems (and however gloomier its likely to get) no evidence that such adverse structural stability is a serious risk now. The diminished availability of working capital, diminished consumer purchasing power, and a massive economy and sector-wide deleveraging (leading in turn to less purchasing) are all causing companies to cut jobs. So far, there is no evidence of an underlying structural problem that will lead to the economy stabilizing (reaching equilibrium) at a point where an unusual number of people will ultimately be (structurally) unemployed.
I notice via TPM that Michael Hirsch of Newsweek put in a big plug for Joseph Stiglitz. That is about as responsible and mainstream as you can get. Probably a lagging indicator, but still important.
Chasing Stiglitz
Obama’s economic team is missing the one guy who’s been right all along.
Dec 4, 2008
http://www.newsweek.com/id/172092
I think Hirsch is wrong when he says that Joseph Stiglitz was the only one who saw this coming. Others, who spoke out, were Roubini, Krugman, James Galbraith, and some Center for American Progress economists whose names I keep getting mixed up. Of course, intellectual frameworks are hard to abandon, and these people were dooming and glooming for so long that they will be criticized as stopped clocks who just happened to be correct. Fortunately Stiglitz and Krugman did add some detail to their predictions that may make them more credible. I heard Krugman at a lecture in early 2001 describing the “Wile E Coyote effect” of financial markets -he runs of the cliff for several yards before looking down and dropping like a rock, which means things can run on in an infeasible manner (thereby makiing the situation worse and the resolution more difficult) before the crash comes. This also leads to overshooting (for example, the housing market crashing to far down below long run euquilibrium prices in a big crash). It gave a very nice picture of what is happening now.
Actually, Wile E. Coyote is pretty darn smart compared to mainstream opinion, since he at least understands the situation as soon as he looks down and says “Ooops!” No living in denial for him.
Hirsch also mentions Bruce Greenwals, one of Stiglitz’ long time collaborators. Hirsch says he is a conservative, but agrees with Stiglitz on the basic issues of this crash and need for financial market reforms. Greenwald visited my department in grad school, and I was always at his seminars when I could attend. I had no idea at all of his political leanings. Well, goes to show you that some issues go beyond politics, if you are reality based.
I read somewhere that when unemployment reaches 10%, that’s when we’re in a depression. Is that true?
There should be repercutions for politicians with records as bad as schrub.
I’d like to see a no tax month for items $5,000. or less, any thing with clean renewable energy and energy efficient and automobiles. I put thoses restrictions because I don’t want rich people to profit too much from them.
perris, I like what you say. Obama needs to consider making a bold policy move.
Ian, would this work? Formulate a New Policy that Emphasizes Job Protection and Let’s Real Wages Float in an effort to Stop the Slide.
So, in times of low or weak economic demand, jobs are kept, but wages hover just above the poverty line. As the Economy settles, People are Protected, until the turn-around comes, and Incomes can Expand Again. Call it the ‘Ride-Out to Recovery’ Policy, or some such thing.
I’m at this minute sitting at LAX having a margarita and chips.
The taxi ride was smooth, I was able to switch my flight to a 4 o’clock flight and still get seat number 15, and there was no waiting for the table where I am sitting.
On a FRIDAY afternoon.
in Los fkn Angeles.
things are slow . . .
I don’t think there is a specific set of criteria for the label
http://en.wikipedia.org/wiki/Depression_(economics)
I tend to agree, even Roubini is not predicting a recession or unemployment rates of 20% or higher.
But right now GM and Chrysler are in danger of going bankrupt due to lack of credit that is as much due to financial melt down as to their much discussed deficiencies -isn’t that a structural problem?
Same with their high labor share of total costs due to the US’s inefficient health care finance system.
So I would agree, but I would like you to explain what you mean by lack of structural problems before I dismiss the idea of a very severe recession that could get close to depression territory before I dismiss the depression scenario.
I do agree that a depression is not inevitable or even likely, *right now*.
I will also add they are punishing many of the states that voted for him.
Listening to Obamas rhetoric in the last few days, he’s now stating reemploy and new jobs equaling 2,500,000. Previously he said create 2,500,000 new jobs. That’s a big difference.
Sounds like rethug heaven – a race to the bottom. How are these people going to meet their commitments?
Waited in traffic for a freight train to pass yesterday, only took 5-6 minutes. Usually takes 15.
No, you really don’t want deflation in wages. That’s the conservative “if only FDR had let wages drop” argument. It’s better to have people lose their jobs, keep the ones that exist at decent wages, and give relief to those who lose their jobs. Then when you get an expansion, the wages are still good. Low wages won’t bounce back up, is the problem.
Not necessarily. Post-WWII unemployment rate peak was 10.8% in 12/82 under Reagan.
I’m no longer that sure of that, honestly. We can’t handle much more bungling of this.
I think Jared Bernstein can be called a real progressive. And TPM says Joe Biden has picked him for his economic advisor. Huh, I thought Joe Biden was the mainstream of the mainstream. Who would have thought that Biden would be the route for a different perspective on econonmics at the White House?
Biden taps economist and … how can we not say it … frequent TPMCafe blogger Jared Bernstein as his chief economics advisor.
http://www.talkingpointsmemo.c…..246953.php
I thought the law was a train couldn’t hold up traffic more than 5 minutes due to the fact there could be an ambulance or firetrucks that need to get by.
Opps, meant to say “not even Roubini is not predicting a depression.”
Obviously Roubini was right in predicting a very big and nasty recession.
not a hard and fast rule. the way most academics define the circumstances during the Great Depression (”depression” is not an economic term… it’s only correctly applied, so far, to that one event), the economy must reach a stable point (a balancing of supply and demand, if you will, to oversimplify qutie a bit) at a level well below full employment (unemployment peaked at around 15% in the Great Depression). This requires an underlying structural problem, which we don’t quite see yet. Right now, this is still a credit and demand driven problem.
I heard Obama say is SAVE or create 2.5 million jobs. So as there are currently 136 million jobs, if there are, say 120 million at the end of Obama, he can say he saved 120 million jobs. Why didn’t W’s speechwriters think of that?
these little signs are the modern society’s equivalent of something re the farmer’s almanac — but I’m too dense to think of it at the moment.
(the margarita)
Wouldn’t that be sweet. I think that one of requirements for hiring train engineers is that they were oppositional defiant as kids.
when real wages are depressed, that is depression
when real assets are depressed that is depression
when real american based investments are depressed that is depression
as far as I am concerned we have been in depression for about two of the last five years, recession for the first three of those years
Well, that’s a new one to me. Maybe it’s only on certain streets?
Re cnn,
Pelosi caving. May say retooling funds can be used for auto bridge loan.
I think the biggest structural risk is that the financial system may become so badly wounded that it would be institutionally incapable of connecting/intermediating capital demand and surplus capital over a longer period of time, that is, it will be become structurally incapable of efficiently matching people who have capital to people who need it. I have a hard time believing that we are at immediate risk of this, but as you say, if they keep on screwing up who knows? So far, I don’t see any signs of structural inefficiency.
In the long long term, there are many sources of structural risks – poor/unaffordable education leading to the global efficient frontier moving away from America’s productivity equilibrium being one source of risk, political instability, and even threats to supply chains and capital assets from global warming/global warming. But not now.
Anyone hear something about Pilgrims Pride (Chicken) filing bankruptcy?
New post Kennedy steps down from Judiciary
That has characterized the U.S. financial system for quite awhile now. Providing leverage for hedge funds, heh.
Yeah I heard some kind of squawking about that.
I don’t care where they get the money from now. Those funds could be replenished in two months when we get the jerks out of the WH.
Some of the laid-off entry-level people made phone calls all day, just to try to get a lead for a closer, who’s selling airtime or airspace, filling in and filing out the infrastructure at the edges of the digital paradigm. A lot of ‘workers’ were expanding the bubbles, a lot were writing code, they all knew they were expendable. A recession was inevitable with such a workforce glut. Has anyone done a cost analysis of drug-testing all those job applicants during the bull years? How much did we read in the last two years about how much job time (=$$) is lost from employees diddling around on their PCs at work? I’m a Marxist (but not in those words), so I understand recessions as ‘government’ by jack boot: employees won’t call in sick anymore, and they’ll stay late; when someone finally gets a(nother) job, it will be nose to the grindstone in gratitude, until the next boom is underway. Not long ago a study showed that something like 80% of us enjoyed our jobs, our work. That’s wrong, isn’t it? Isn’t work and life supposed to suck? Isn’t that why we’re supposed to suffer and scrape just to make a buck? Doesn’t capitalism mean if you don’t have capital you’re a schmuck?
It’s bad enough that most of us who work are literally getting permission each payday to participate in society until next payday. We’re probably better off if we try to organize our way through this disaster, rather than trying to spend our way through it. If we organize our way, maybe we can peer into the abyss and get a glimpse of what the worst is – digital version this time. If we spend our way, we’ll never know. I want to know.
actually, I’m not sure I agree with that. I think what’s been too much easy money (from bubbles) looking for real, good investment opportunities, and failing to find them (just more bubbles). This isn’t so much a structural inefficiency problem as, well, stupid, incompetent leadership. The answer is what is happening now — massive, painful deleveraging. Once the economy purges itself of the excess (on both the supply and the demand side), things should stabilize and we can return to real productivity-led growth. It will be terrifyingly painful in the meantime (10%+ Reagan-style unemployment), and any commodity shocks or deflation in the interim, will make it seem even worse (and, yes, that will happen too). But not a reduce of the 1930s.
Ian I am just exhausted trying to get people to understand this simple picture and the ripple effect if the Big 2.5 tank in terms of supply chain beginning with parts manufacturers.
It. Is. Easy. To Understand.
Thanks for the post.
I think you have identified some of the most important structural risks, but I am not so optimistic that they are long term problems.
I wonder whether( that the current mortgage securities system can handle anything other than constantly increasing home prices and sales volumes. I wonder whether the reforms so far are adequate. That is why I hope for what many would consider radical solutions such as a new Home Owners Loan Corporation, and Alan Blinder’s recommendation of standard mortgage securities contracts sold only in formal exchanges with an information clearinghouse.
But I have to admit my ideas are based more on my perhaps underinformed economic thought experiemnts than data.
Thanks for that great answer!
If only We could generate wide-spread understanding of an ‘elegant’ Economic contraction like you posit, then We would be empowered to Compassionately build a Smart Safety Net for the jobs lost.
People who lose jobs aren’t bad, but those who don’t catch them when they fall certainly are.
like I said above, I do think that there are probably (systemic) risks for structural crisis in our economic system, and those risks are growing. When oil prices were at $5 per gallon I thought that we were actually looking at a situation where goods and people could no longer get to where they need to work, and employment and supply chain decisions were starting to be made solely on the basis of transportation costs (as happened in the ’70s). But that seems to be less of an issue right now.
Had a brief conversation at the check out at the local Piggly Wiggly with a 20 year old cashier and a UAW member who was doing a little shopping. Both were angry and bewildered at Congress bailing out bankers with no strings attached but would seem to be willing to let the Big 2 1/2 go bust. The UAW member was worried about losing his pension after working for GM for 34 years. People in Michigan are strarting to get it. Republicons are a far greater threat to American values than any cave dwelling terrorist.
“Republicons are a far greater threat to American values than any cave dwelling terrorist.”
we assuming that they’re not actually connected somehow?
When you reset at a lower level it can persist for a long time. The financial sector is badly broken, the velocity of money is dropping through the floor. 8 trillion dollars has been used to very little effect so far. I am not all that sanguine. I think this is going to keep getting worse until serious stimulus is used to get us out, and I worry that Obama won’t do a big enough stimulus.
As for the financial sector, it’s not working right now. The Fed is becoming, step by step, a national bank, in the sense that it is lending more and more directly.
Maybe it’s just here in Mi
Ian,
You were quite smart to jump on the Labor data and get a post up. This data tipped the hand of Congress to move on a bailout. It’s fun to compare your time of post to the timing of the PR churn on the Hill last night…Very interesting.
Netroots, keep up the information drive…
Great journalistic move. Thank you.
Ian, it looks like Krugman has been reading your posts. :-)
http://krugman.blogs.nytimes.c…..t-numbers/