DUDE, where’s our jobs??
Most of us who live in metro DC area aren’t living with the absolutely dismal unemployment numbers the rest of the country is experiencing. With our relatively rosy 4.9% rate, our region has been somewhat insulated against the staggering job losses thus far. Don Peck over at the Atlantic has a great article up this weekend about how persistently high unemployment rates will change the complexion of America for generations to come:
“The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.”
The four week averages for unemployment claims have started moving in an ugly direction, and considering this is happening when all these people are supposedly being hired for census jobs it suggests that there will be continuing losses in February when the NFP report hits this Friday. By the way, the last NFP number for January of -20K jobs had the seasonal adjustment for all the temporary Christmas workers. Without this adjustment, I’m looking for ugly numbers in February and March.
This is a four week moving average of weekly claims since 1971. The current level of 496K is quite high and the worst since last November. We need to see these numbers start to come in sub 400K before we can start to have any hope of chipping away at the real unemployment rate.
The durable goods number is also of concern, declining 0.6% ex-aircraft. This is telling us that we’re still a ways off from having capital investment lead
us out of the Depression the recovery, as is what normally happens. And consumer confidence? It plunged 10% in January. Now, consumer confidence is probably the most unreliable indicator out there granted, but we usually don’t see it take a ten percent hit in a month. Something wicked this way comes.
The bottom line is that we have an effective unemployment rate of 20%. For some reason, Americans have trouble coming to grips with how much trouble we’re in. Once this starts to sink in consumers will pull in spending, small retailers will shutter, investors will hibernate in caves, etc. The only thing that will stop the slide is to convince capital to take more risk. There are policy levers available to facilitate this, but they include elimination of taxes on capital income, everything from interest to dividends to capital gains, so I can almost guarantee you they won’t be pulled by this administration. Indeed, since they’re proposing the diametric opposite in all these categories to finance their health care monstrosity, they’re likely to aggravate the problem.
The news isn’t all bad: at least we’ll have free health care.