from bloggingstocks.com
Posted Mar 9th 2009 12:10PM by Joseph Lazzaro
The number "5 million" doesn't seem like much in a world of billions and trillions.
But it's a lot when you're talking about the U.S. job market. That's because five million represents the number of jobs the U.S. economy would have to create to achieve what the U.S. Department of Labor calls "full employment."
Full employment is a condition in which every adult who wants a job can secure one: It's characterized by both GDP growth and adequate bargaining power for potential employees.
U.S. unemployment rate: highest since 1983
What's the job market like currently? Well, to borrow a phrase from CNN's immortal Larry King, "We ain't exactly at full employment, right now."
The U.S. economy lost another 651,000 jobs in February, with the nation's unemployment rate soaring to 8.1% from 7.6% in January, the Labor Department said. It's the highest unemployment rate for the U.S. since 1983.
Further, the U.S. economy has now lost more than 4.4 million jobs since the recession started in December 2007 and a staggering 2.4 million in the past four months.
There are now 12.5 million people officially unemployed, the Labor Department said. Most economists don't view the official number of people unemployed as indicative of true joblessness because the statistic does not include those unemployed who have given up looking for work. Add those and the number of unemployment probably is closer to 15 million, and the jobless rate easily exceeds 10%.
In addition, there are now 8.6 million people forced to work part-time because they were unable to find or their employers would not grant them full-time work. Add those part-time workers to the unemployment rate and the percentage of people underemployment/unemployment approaches 15% -- light years away from full employment.
Further, some may view the 5 million job deficit as a minor hurdle, but it is not, economists say. Consider this statistic: the United States economy must create 100,000-125,000 jobs per month, just to keep the unemployment rate from rising. Another stat: at a normal rate of job growth, 200,000 jobs per month -- or at least what labor statisticians viewed as normal before the globalization era -- it would take four years for the U.S. economy to achieve full employment: four years.
That would mean the U.S. would not resume a normal unemployment rate -- between 3.5-4.5% -- until 2013. It would take a shorter time if the U.S. experienced above-trend job growth -- for example 300,000 jobs created per month -- during a robust recovery.
For investors, all this fussing about job growth is definitely not merely an academic exercise. It's almost impossible for corporate revenue and earnings to grow in a sustained way without job growth, as job growth drives a myriad of bull indicators: household formation, consumer spending, consumer confidence, business confidence -- even business decisions to undertake expansions and/or launch new projects.
In addition to robbing the nation of GDP output (and corporate revenue and earnings), unemployment, as most investors know, exacts a tremendous human toll, and leads to increases in both state and federal social services costs, due to increased unemployment insurance claims, home foreclosure-related costs, and Medicaid expenses, among others.
Unemployment also does not occur in a vacuum. Of course, one can never predict with 100% certainty the winds of political sentiment, but history has demonstrated that in the modern era, sustained, high unemployment rates have almost always led to political power gains for the Democratic Party, followed shortly thereafter by economic and social reform. The periods of greatest economic and social change in the United States have occurred during high unemployment periods.
Essentially, the American people, casting aside the drawbacks of the American economic system -- corporate capitalism -- remain very supportive of it, until unemployment starts to rise. At that point, the American people begin to question their sacrifices for and investment in the system, if they're not experiencing a vital benefit, namely: jobs.
It's at that point that the American people say, 'Fix the system,' or 'Correct the problem,' which propels both economic and social reform: the system adjusts, and then GDP growth and job growth resume their merry path. At least, that's been the historical pattern: here's hoping for a repeat.
Economic Analysis: Indeed, full employment is a long way away. Further, along with fiscal stimulus, an essential required to achieve full employment concerns fixing the banking system to get credit -- the lifeblood of the economy -- flowing more freely. Credit is essential because it enables businesses to expand, which leads to increased hiring.
to read original article and comments...
U.S. unemployment rate: highest since 1983
What's the job market like currently? Well, to borrow a phrase from CNN's immortal Larry King, "We ain't exactly at full employment, right now."
The U.S. economy lost another 651,000 jobs in February, with the nation's unemployment rate soaring to 8.1% from 7.6% in January, the Labor Department said. It's the highest unemployment rate for the U.S. since 1983.
Further, the U.S. economy has now lost more than 4.4 million jobs since the recession started in December 2007 and a staggering 2.4 million in the past four months.
There are now 12.5 million people officially unemployed, the Labor Department said. Most economists don't view the official number of people unemployed as indicative of true joblessness because the statistic does not include those unemployed who have given up looking for work. Add those and the number of unemployment probably is closer to 15 million, and the jobless rate easily exceeds 10%.
In addition, there are now 8.6 million people forced to work part-time because they were unable to find or their employers would not grant them full-time work. Add those part-time workers to the unemployment rate and the percentage of people underemployment/unemployment approaches 15% -- light years away from full employment.
Further, some may view the 5 million job deficit as a minor hurdle, but it is not, economists say. Consider this statistic: the United States economy must create 100,000-125,000 jobs per month, just to keep the unemployment rate from rising. Another stat: at a normal rate of job growth, 200,000 jobs per month -- or at least what labor statisticians viewed as normal before the globalization era -- it would take four years for the U.S. economy to achieve full employment: four years.
That would mean the U.S. would not resume a normal unemployment rate -- between 3.5-4.5% -- until 2013. It would take a shorter time if the U.S. experienced above-trend job growth -- for example 300,000 jobs created per month -- during a robust recovery.
For investors, all this fussing about job growth is definitely not merely an academic exercise. It's almost impossible for corporate revenue and earnings to grow in a sustained way without job growth, as job growth drives a myriad of bull indicators: household formation, consumer spending, consumer confidence, business confidence -- even business decisions to undertake expansions and/or launch new projects.
In addition to robbing the nation of GDP output (and corporate revenue and earnings), unemployment, as most investors know, exacts a tremendous human toll, and leads to increases in both state and federal social services costs, due to increased unemployment insurance claims, home foreclosure-related costs, and Medicaid expenses, among others.
Unemployment also does not occur in a vacuum. Of course, one can never predict with 100% certainty the winds of political sentiment, but history has demonstrated that in the modern era, sustained, high unemployment rates have almost always led to political power gains for the Democratic Party, followed shortly thereafter by economic and social reform. The periods of greatest economic and social change in the United States have occurred during high unemployment periods.
Essentially, the American people, casting aside the drawbacks of the American economic system -- corporate capitalism -- remain very supportive of it, until unemployment starts to rise. At that point, the American people begin to question their sacrifices for and investment in the system, if they're not experiencing a vital benefit, namely: jobs.
It's at that point that the American people say, 'Fix the system,' or 'Correct the problem,' which propels both economic and social reform: the system adjusts, and then GDP growth and job growth resume their merry path. At least, that's been the historical pattern: here's hoping for a repeat.
Economic Analysis: Indeed, full employment is a long way away. Further, along with fiscal stimulus, an essential required to achieve full employment concerns fixing the banking system to get credit -- the lifeblood of the economy -- flowing more freely. Credit is essential because it enables businesses to expand, which leads to increased hiring.
to read original article and comments...
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