Tuesday, July 14, 2009

Our economy is in the crapper and likely will be for some time

Last month, I started to feel better about our economy's prospects. This month, not so much. Why the change in perspective? Well, I keep reading articles like this one by Mort Zuckerman, which is happily entitled, "The Economy Is Even Worse Than You Think." In it, Mr. Zuckerman provides a list of 10 items to support his article's title:

-June's [unemployment] total assumed 185,000 people at work who
probably were not. The government could not identify them; it made an assumption
about trends. But many of the mythical jobs are in industries that have
absolutely no job creation, e.g., finance. When the official numbers are
adjusted over the next several months, June will look worse.

- More companies are asking employees to take unpaid leave. These people
don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the
last 12 months but were not counted. Why? Because they hadn't searched for work
in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a
kind of stealth underemployment, has doubled in this recession to about nine
million, or 5.8% of the work force. Add those whose hours have been cut to those
who cannot find a full-time job and the total unemployed rises to 16.5%, putting
the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector,
roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week
less than before the recession began, the lowest level since the government
began tracking such data 45 years ago. Full-time workers are being downgraded to
part time as businesses slash labor costs to remain above water, and factories
are operating at only 65% of capacity. If Americans were still clocking those
extra 48 minutes a week now, the same aggregate amount of work would get done
with 3.3 million fewer employees, which means that if it were not for the
shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds
the 8% rate projected by the Obama administration).

- The average length of official unemployment increased to 24.5 weeks, the
longest since government began tracking this data in 1948. The number of
long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million,
an all-time high.

- The average worker saw no wage gains in June, with average compensation
running flat at $18.53 an hour.

- The goods producing sector is losing the most jobs -- 223,000 in the last
report alone.

- The prospects for job creation are equally distressing. The likelihood is
that when economic activity picks up, employers will first choose to increase
hours for existing workers and bring part-time workers back to full time. Many
unemployed workers looking for jobs once the recovery begins will discover that
jobs as good as the ones they lost are almost impossible to find because many
layoffs have been permanent. Instead of shrinking operations, companies have
shut down whole business units or made sweeping structural changes in the way
they conduct business. General Motors and Chrysler, closed hundreds of
dealerships and reduced brands. Citigroup and Bank of America cut tens of
thousands of positions and exited many parts of the world of finance.

- Job losses may last well into 2010 to hit an unemployment peak close to
11%. That unemployment rate may be sustained for an extended period.

You should read the whole thing. It's good stuff. The kind of stuff that makes me want to curl up in my bed with a bottle of scotch.

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