April 2009 Archives

Sat Apr 4 22:00:39 CDT 2009

March Unemployment Doom

I guessed that it was going to go up 0.4%, to 8.5% and it did. I'm thinking of starting a pool. :) Mainstream media is reporting that when you add in the people who have given up looking for work, or those who would prefer full-time jobs but are working part-time jobs, then the rate is 15.6%. The same article reports that this was a bucket of cold water on the heads of those who thought recent news might have been suggesting that the economy was turning around.

A Washington Post Analysis article quotes a California State University economist, Sung Sohn, as predicting that the unemployment rate will be over 10% "well into 2010."

When you look at coming attractions such as GM filing for bankruptcy (and how this will also affect GM's business partners), it seems all but certain that unemployment will increase through 2009. It generally continues to stay high even after "business" recovers, because employers want to be certain of the demand before taking on more expense.

Less and less people working means fewer people buying things, and this cycle feeds back on itself. At times, i wonder if 10% is optimistic. The US BLS data show a 0.4% or 0.5% increase each month for the past four months. If we assume an average increase of 0.3% over the next 9 months, then we will be at a rate of 11.2% national unemployment at the beginning of 2010.

The peak in 1982 was 10.8%, so we will have the worst unemployment rate since the Great Depression. This is the national average — Michigan is already at 12%, and California, Oregon, Nevada, North and South Carolina are already all over 10%.

I think the second half of the year is going to really tell whether or not this is 70s-80s stagflation, or Great Depression II. If most indicators don't suggest a recovery is underway by the last quarter of this year, i think things will get very, very bad. People who have been barely surviving until now will be crushed by credit card debt, and the companies that hold that debt may themselves fail. Real estate prices could collapse (let's imagine they loose 40% of their value) in some parts of the country like California, NYC, and Florida. And then the effects these things, too, will ripple through the economy.

I think some people feel like talking about this only makes the problem worse. As if talking about the state of the economy and where it's going some how controls it. I understand what they mean, but i think any effects of this nature are miniscule by comparison with the effects of high unemployment rates, falling real estate prices, and so forth.

So i'm just trying to figure out what this will look like. What things i will need or want that might be a lot more expensive in the future. Or what other effects there might be. Where i want to be when the shit hits the fan.

Posted by johan | Permanent link | File under: Doom