Employment Much Worse in this Recession

Below are three charts comparing unemployment and labor force growth in this recession compared to other post WWII recessions. NOTE: Click on a chart to open it larger in a separate window.

Before we get into the charts, these charts certainly underscore the critical need to do much more for job growth than worrying about debt.  The Obama Administration and Congress really need to place a much greater emphasis on jobs.  This is both a Main Street issue and is also a key piece of shoring up the housing sector.

Looking at Chart 1, it's sobering to see how much higher unemployment has risen, and how fast it's risen in this recession, compared to other recessions.  Keep in mind that the vertical axis is percent so the fact that the labor force itself is larger is not a factor in these results.  The unemployment rate is a ratio determined by dividing total unemployment by the total labor force.  Chart 1 shows that jobs have been shed at a much greater rate than in previous recessions.  I suspect that's due to (a) fewer restrictions on an employer's ability to reduce their workforce, and (b) employer's perception of the likely depth and length of the recession.

What I find even more shocking is Chart 2, the percentage change in the civilian employment by month across post WWII recessions (Charts 1 and 2 aren't directly comparable).  Chart 2 is just the monthly percent change in civilian employment and it's a dramatic drop.

Chart 3 shows the percentage change by month of the civilian labor force.  The civilian labor force is defined as people 16 years old or older who are not in the military, prison, institution, school and are employed or looking for work.  Chart 3 shows that the civilian labor force kept growing, but at a slowing rate, up until about this past October.  Then, the civilian labor force actually began to shrink.

A drop in civilian labor force can be due to a variety of reasons though a significant reason right now is it likely reflects people dropping out of the labor force as they stop looking for work.  Another factor may be immigrants, legal and otherwise, returning to their prior home since labor force includes U.S. citizens as well as legal and illegal aliens.  One aspect of the labor force decline that concerns me is I suspect there's a good deal of older folks (over 40) in this pool whose jobs are not likely to return.  This type of unemployment problem is called structural unemployment.  It's the most difficult type of unemployment to solve.  Another concern with a declining labor force is that it also reduces what the economy can produce, absent an offsetting productivity gain.

For a bit of good news, Chart 6 illustrates that the official unemployment rate is nowhere near the official rate of the Great Depression.  By official unemployment rate I mean to suggest that the actual unemployment rate is greater.  The official rate does not count people who would like a job but have stopped looking for work.  These people are referred to as discouraged, despite whatever they might be called on FOX News!

Bankers, Economics, and when will Obama REALLY Work for Main Street?

Joseph Stiglitz spoke today at the Davos World Economic Forum.  In a wide-ranging talk, Bloomberg reports that he chastised bankers for creating 'negative value' for society.  Reuters reports that banks are doubling-down on risk.

No doubt there are those that argue that bankers are just being rational when using government bail out money to make money for the bank's shareholders.  These folks argue that it's not the banks fault.  Rather, it's government's fault for not instituting the 'correct' rules.  Yes, let's blame the rape victim for the rape.  What me?  I did nothing wrong.  I was presented with such an opportunity that any hot blooded male would have done the same thing.  Right.

I, for one, supported the bank bailouts.  I still do.  There was a problem with not putting stringent lending strings and so forth on those bailouts.  That's why Tim Geitner and others need to be replaced.  They never should have been part of the Obama Administration.  Though, law is conservative, and Obama has certainly been conservative in his economic support for the middle class.

The Administration's recently announced measures aimed at the middle class are like feeding crumbs to the people of Haiti.  Sure, they'll take those crumbs.  What would you do?  I would.  That doesn't absolve Obama of his insane economic policies, the latest one being a spending freeze.  Recall that during the campaign, McCain proposed such a policy and candidate Obama ridiculed it saying it was like using a hatchet when what you need is a scalpel.  He's just handed the opposition a gift.  As Krugman rightly points out, it's a stupid, cynical, wrong-headed political stunt.  In an earlier post, I addressed the need for more stimulus spending rather than addressing the debt.  Professor of Economics James Galbraith characterized the spending freeze proposal as like tossing red meat to the sharks in hopes that the sharks won't go after the people.  Ouch.  He's right, in my view. 

Robert Reich hit the nail on the head in saying "...Obama’s package of middle class benefits is small potatoes. They’re worthwhile but they pale relative to the size and scale of the challenge America’s middle class is now facing. Obama can no longer afford to come up with lists of nice things to do. At the least, he’s got to do two very big and important things: (1) Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly. (2) Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy — which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)"

Rachel Maddow had a great segment last evening in which she showed a series of bar charts on GDP and job losses by quarter for the last two years of the Bush Administration and the results during the Obama Administration.  The results are striking, GDP growth and the reduced job loss numbers are a good start at turning the economy around.  The economy has begun to recover, and the banking sector's not on it's death bed.  This is the beginning of a recovery.  Yet, what's your view of how the Obama Administration has done?  They have both houses of Congress, 59 seats in the Senate (more than the R's had at the end of the Bush years) and what does Obama propose?  A spending freeze.  As Ms. Maddow put it "there he is on the one yard line and what does he decide to do?  He decides to punt from the one yard line rather than driving it in for the score."