Nouriel Roubini: "A Sub Par Recovery"

When Doctor Doom speaks, I listen.

"The recovery is going to be subpar," Roubini said. "I see a one percent growth in the economy in the next few years. There will also be 11 percent unemployment next year and the recovery is going to be slow. It's going to feel like a recession even when it ends."

To clarify the U3 will be 11%. The U6 should reach twice that. U3 is the "official unemployment rate" as calculated by the Bureau of Labor Statistics. U6 is the broadest measure of unemployment. It includes those who are unemployed but no longer looking for work and those who are working part-time jobs because they can't find full-time employment. The U6 is already 20% or more in at least six states including California and Michigan.

On a second stimulus, Dr. Roubini adds that he thinks "there will be another one toward the end of the year. We need to have more shovel ready labor intensive infrastructure projects." He concludes that we'll need it. Yup.

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The Painful Unemployment Reality

If you think the real unemployment rate in the United States is 9.5%, I'd urge you to reconsider that already bleak assessment. The reality is far bleaker than that. The nation's real unemployment rate is 16.5%. That's because the official 9.5% rate doesn't include the 3.7 million-plus people who are reluctantly working only part time because of the poor labor market. And it doesn't include the workers who have given up scouring want ads for seemingly nonexistent jobs. Today the New York Times looks at the nation's painful reality:

In California and a handful of other states, one out of every five people who would like to be working full time is not now doing so.

It is a startling sign of the pain that the Great Recession is inflicting, and it is largely missed by the official, oft-repeated statistics on unemployment. The national unemployment rate has risen to 9.5 percent, the highest level in more than a quarter-century. Yet it still excludes all those who have given up looking for a job and those part-time workers who want to be working full time.

Include them -- as the Labor Department does when calculating its broadest measure of the job market -- and the rate reached 23.5 percent in Oregon this spring, according to a New York Times analysis of state-by-state data. It was 21.5 percent in both Michigan and Rhode Island and 20.3 percent in California. In Tennessee, Nevada and several other states that have relied heavily on manufacturing or housing, the rate was just under 20 percent this spring and may have since surpassed it.

Almost nobody believes that unemployment has finished rising, either. On Tuesday, President Obama said he expected it to "tick up for several months."

It's fair to say, then, that the downturn is moving into a new stage. It has already been through three: the prologue, when credit markets began to quiver in 2007; the big shock, when the collapse of Lehman Brothers, in September 2008, led into almost six months of terrible economic news; and the stabilization, when the news became more mixed.

Now comes Stage 4: the slog.

A slog? More like a deepening morass. According to the New York Times by September, "one out of every four Californians -- and Oregonians and South Carolinians and Michiganders -- who would like to have a full-time job might not have one."

Even more troubling is the "median weeks unemployed" which now stands at 17.9 weeks, a number much higher than at any time since the BLS began keeping track of this statistic in 1967. This means that not only are people getting laid-off, they are not finding new jobs in quick fashion. The broadest measure of unemployment, "U6" (16.5%) is also the highest since they began keeping this statistic in 1994. The highest number before this recession was 11.8%.

Nor does this number include those now "enjoying" furloughs. In California, state employees, for example, have been furloughed three days a month. A friend who works for a gay men's health care non-profit recently had his hours cut 20%. Suddenly even full-time jobs are becoming part-time ones.

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Are We on the Verge of Structural Unemployment?

I confess that I have been avoiding writing on the economy. Not for want of trying, I've probably tried to write a good half dozen posts that last two weeks on some aspect of the mess we face but time and again, I give up half way through in frustration and utter depression. Instead, I've focused on more cheerful subjects like Pakistan and Afghanistan. I'll take a score of failed states over our failing economy. And failing it is.

Tonight, well, actually, this morning since I can't sleep thinking about this mess that has enveloped the globe, the frightful bleed in jobs raises serious questions as to the depths of this downturn. This past Friday was a dark and dismal day. The US economy lost 2.6 million jobs in 2008 and it is now losing 600,000 a month. Basic math skills tell me that's quite a clip. The unemployment rate is now 8.1%. Now that's an interesting number because as Paul Krugman points out in his Behind the Curve op-ed in today's New York Times it is the number that the Obama Administration planned for year-end 2009 number. It's not-even mid-March and we have blown through it. That's certainly a worry in more ways than one.

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The American Crisis

US payrolls were slashed by 524,000 jobs in December and by 1.9 million in the last four months of 2008. All told,  2.6 million jobs were lost in all of 2008. That's quite a dubious achievement but this didn't happen by accident, it happened by design. Conservative free market ideology and their devotion to a race to the bottom they call low taxes is the cause of all this. Let's not ever forget this. Conservatives profess to love their country and they profess to hate government. The pity is that, at times, they can't differentiate between the two. There is clearly a difference between the country and the government. The former is much larger if more nebulous than than latter but let's not forget that the government, in all its manifestations, is part of the visible edifice and the ledger of our country. In their zeal to drown the edifice of government in a bathtub, conservatives have managed to drown the country's ledger in a near eleven trillion dollar debt and throw at least 7.2% of us out of work.  It's not just the government that owes that lofty sum, it's the country. It's us. It's Americans who are now increasingly out of work thanks to the nefarious effects of an ideology that benefits the few at the expense of the many.

Conservatives so hate government that they can't seem to see that they are destroying the country in said pursuit. Even now. This is not a charge I say lightly. Even though conservatives have long impugned the patriotism of liberals for several generations now, we, as liberals, have failed to answer back. It's time we do. Conservatives wrap themselves in the flag even while they trample the rights, liberties and livelihoods of most Americans. Free markets are not free, there are costs. Witness AIG. There is no such thing as free trade, it too has costs. These are euphemisms for a perverse notion that conservatives call "economic liberty". By this, they mean unregulated markets, low taxes, the right to move capital across global markets (to call them countries is so 19th century) in pursuit of unholy profits based on tapping the cheap labour of the unprotected masses in the developing world. Backed by a devotion to a strong dollar and weak barriers to trade, they have dismantled brick by brick American manufacturing moving it to China, Bangladesh or wherever the lowest cost worker happens to be. I ask you is this patriotic? Is this love of country?

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A Bounce in the Jobs Report

The Bureau of Labor Statistics reported today a better than expected jobs report. While the unemployment rose slightly to 9.9 percent, the US economy added 290,000 jobs in April. That's the single largest monthly increase since March 2006. While the uptick was boosted by the hiring of 66,000 temporary public sector workers for the 2010 Census, the private sector also added a robust 231,000 new jobs. A survey of analysts by Bloomberg News had predicted a net gain of 162,000 jobs. In short, the April jobs report beat all expectations though that shouldn't obscure the fact that the unemployment rate remains. The rate climbed to 9.9 percent as more people entered the job market looking for work. About 195,000 workers began looking for work last month, according to the Labor Department.

From the BLS release:

 

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010.

In April, the number of unemployed persons was 15.3 million, and the unemployment rate edged up to 9.9 percent. The rate had been 9.7 percent for the first 3 months of this year.

Among the major worker groups, the unemployment rate for whites (9.0 percent) edged up in April, while the rates for adult men (10.1 percent), adult women (8.2 percent), teenagers (25.4 percent), blacks (16.5 percent), and Hispanics (12.5 percent) showed little or no change. The jobless rate for Asians was 6.8 percent, not seasonally adjusted.

The number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up over the month, reaching 6.7 million. In April, 45.9 percent of unemployed persons had been jobless for 27 weeks or more.

Among the unemployed, the number of reentrants to the labor force rose by 195,000 over the month.

In April, the civilian labor force participation rate increased by 0.3 percentage point to 65.2 percent, as the size of the labor force rose by 805,000. Since December, the participation rate has increased by 0.6 percentage point. The employment-population ratio rose to 58.8 percent over the month and has increased by 0.6 percentage point since December.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was about unchanged at 9.2 million in April. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

About 2.4 million persons were marginally attached to the labor force in April, compared with 2.1 million a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 1.2 million discouraged workers in April, up by 457,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities.

 

Though more than 100,000 jobs a month are needed just to keep up with the growth of the working-age population, this report builds on a modest recovery trend and in that there's solace for at the very least the Administration's policies have stemmed the bleeding of jobs. It bears recalling that when President Obama took office the economy was shedding 750,000 jobs monthly. Now over the past four months, the economy has added 573,000 jobs.

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