Jobless America

By Felix Salmon
April 3, 2009

The unemployment rate is now 8.5%, which is very bad, and is up sharply from 5.1% a year ago. But just check out U6, the broad measure of underemployement: people who want to get more work than they’ve got, but can’t find it. A year ago — three months into the recession — it stood at 9.3%. Today, it’s risen all the way to 16.2% — an increase of 6.9 percentage points — and no one thinks it’s peaked yet. There are now 9 million “involuntary part-time workers” in America, and rising; these people are, as a rule, spending as little as they possibly can.

It’s true that unemployment is a lagging indicator, and that if we’re looking for signs of recovery then the payrolls report is not a great place to start. But there’s nothing here to give any indication that America’s animal spirits have any reason at all to turn around. We, as a nation of individuals, increasingly have neither the ability nor the inclination to borrow money or to spend it — and there’s nothing the banking system can do about that, whether it’s recapitalized or not. So I do wonder where those people forecasting recovery this year think that it’s going to come from.

17 comments

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First, congratulations on your move to Reuters! Quoting:

“So I do wonder where those people forecasting recovery this year think that it’s going to come from.

Recovery, I think, is being defined down as “not getting much worse.” In fact, I would attribute the presently rising stock market as being driven upward mostly by that outlook.

“It’s true that unemployment is a lagging indicator, and that if we’re looking for signs of recovery then the payrolls report is not a great place to start.”

Maybe for the classic post-war business cycle, but why should that be true this time? We are in the early stages of a secular change in household consumption and savings behavior, and that shift toward savings is the most important factor driving the economy. Bleak employment figures are likely to lead, not lag further retrenchment by consumers.

Posted by Dave L | Report as abusive

Felix goes straight to the point.
This ‘coming recovery’ is as real as the pre-bubble-bust prosperity was.
The mere fact that we’re talking about it is part of the hype.

Posted by YR | Report as abusive

It looks like “flat” is the new “up”.

Posted by Jesse M. | Report as abusive

re. wondering where the recovery is going to come from: recovery means recovery of the banking system–not recovery of our standard of living.

Posted by Brian | Report as abusive

Don’t you just giggle to yourself when these talking heads are quoted somewhere or appear on CNBC stating: “we beleive the Market has bottomed and it time to get in”!

-Folks get ready to retest the lows again!!

Posted by David | Report as abusive

Someone didn’t have their morning coffee. Even though the unemployment rate hit 8.5%, 91.5% of the population is still working. Recovery doesn’t come from dinosaur companies that should have been gone anyway, it comes from businesses that do things in a better way that are able to gain market share as the old go away. At some point, people will start buying again – clothes wear out, cars wear out, houses are so cheap in some places that people are starting to buy them. We may not get back to where we were but recovery is relative. I’m one of the fools who thinks we are about to turn around. Too much coffee maybe.

Posted by Beth F. | Report as abusive

“So I do wonder where those people forecasting recovery this year think that it’s going to come from.” Um, helicopters?

Posted by E L | Report as abusive

Even though the unemployment rate hit 8.5%, 91.5% of the population is still working.

91.5% of the labor force is working. The labor force is only 2/3 of the population, and declining relative to the population (as it normally does when people can’t find jobs).

If you use the pre-recession labor force participation rate, the headline unemployment would be another 75-100 bps higher.

Posted by bk | Report as abusive

Beth F.–
In fact nothing will turn around until real wages are once again brought in line with productivity. Had wages kept pace with productivity from 1972, minimum wage today would be $19 an hour. Of course, this is something never heard from an authority inclined to re-shingle the roof when the foundation is crumbling. “The better way” is the acknowledgment the bedrock of any company is not found among its shareholders or CEO, but with those whose lives are spent bearing its weight–the working class. Certainly people will buy again; but with less, we will doubtlessly see the market fall again, all the while ignore the white elephant that will prove our eventual undoing.

Posted by John B | Report as abusive

I thought this line was interesting “We, as a nation of individuals, increasingly have neither the ability nor the inclination to borrow money or to spend it — and there’s nothing the banking system can do about that, whether it’s recapitalized or not.” Well I would say businesses’ need to borrow is very much present. My opinion as a young banker who lost his job recently (however I did find work)is I certaintly don’t need to borrow anymore and certainly do not want to spend anymore than necessary. In fact it’s become almost a game to me to spend as little as possible. Many of my peers are in the same boat and we trade ideas on how to spend less. So my thought is there are many others who feel the same. Even when things improve the lasting impression this business cycle has/will leave will forever influence my financial choices. Recovery I suppose means different things to different people. To people like myself it means having a job, paying my bills and saving a little extra. To others it means…?

Posted by David | Report as abusive

“Unemployment rate” is joke at best, terms associate with it, we can kindly say are spin, abusive and degrading at best AKA No longer searching for jobs which pops up when one runs out of unemployment, Same for compare “now to depression unemployment” as they counted folks then, now use some sort of mystical “adjusted phone survey stat models” that always ended up “adjusted for etc” months later. Friend in that area simply doubles reported to arrive at real numbers. His standard joke is “after 25 years with data NEVER EVER had ONE “unemployed former elected official on lists”.
Now to address the fable of “We, as a nation of individuals, increasingly have neither the ability nor the inclination to borrow money or to spend it” Sort of echoes the massive howls at $3-4/gas classic interviews at the pumps “I cannot afford this, have to cut back drives, car pool, love the bus, get rid of SUV, want a Primus etc.” Well now gas around $2, more driving, public trans funds cut, Primus on sale as lots full of them, SUV-Truck sales are up, or one might say “citizens regress to good ole days”. This reality is going on despite the “recession” and saving-frugality will go same route. sounds really good but pain in butt to do.
Amusing to think that the “I want it all now, charge it, what is min payment” of past 20-30 years education-culture is going to change when economy sweetens. Folks not long back we are the same nation where credit card commercial humiliated and degraded those antiquated pathetic fools using real live cash in shopping line! Their image, one of impeding us all, clumsy dullards, nearly dangerous trouble maker to our society verse the neat, sharp,wonderful busy folks that just swipped the Plastic. NOTE MEDIA NOR anyone back then never mentioned negative saving rats
We entered into era where we are behind rest of industrial and some not so industrial nations in education at all levels, literacy, health care, and most social/demographic and what may be listed as “moral/ethical measurements. NONE ever discuss measurements used to establish value of a nations currency, tech literacy,infrastructure, real industry, resources etc currency. This is totally ignored as we rank low in that area, most are not concerned, educated or aware of the real USA status as “We build arena’s not roads, sewers, rial lines, Fiber-DSL and such mundane stuffs” so we can watch $100 mil playes represent US? The social theory of “See my town, college, etc beat yours”,I did nothing but cheer, so I am, by some sort of association, better then then you? Or, perhaps, the “My Gladiators beat yours AKA “Final days of Rome” syndrome?
For 20-30 years USA citizen feed “charge it, you deserve it, (not earned it). Worse, were taught to “Do not expect to much from any government, Wall St and banks as they are crooks etc”. We now find such was 100% true. Whole gang, all routinely and openly confirm via the little “opps we lost billions, need trillions” financial debacle more then proves. Now that they trained us to expect such from them, we no longer hit streets to protects, something about “Expectations lead to actions” unlike those of 60-70′s, “expectations” lead to silence and inaction’s!
Now Trillions needed but none (other then auto for what is now chump change, $32 bil or so), gets hammered and micro-managed, fired, CH11 looms etc, at same Government sends trillions to WS and Banks. yet silence on main street oddly except at auto0unions, yet banks will not even reveal trillions went. MOST amusing is how pompously puffed DC is about “we got 50 MILLION back of bonus’s, and will NOT discuss how much “bonus” was awarded to the folks that lead to failures over last two years..nor how much campaign money sent to whom over last two years and public silent,”Expects them all to do that sorrt of things as they are all crooks”, so “they” keep on doing “it”!
So how does it all tie in to “we were trained to “expect crooks and corruption in government and the recovery”… Simple, “we” have not questioned how 5% or LESS, own and control 95% of all USA treasure and wealth (called real worth).
We will respond as told when “Recovery under way and go right back to old ways AKA $2/$4 gas. We will not question how much the 95% lost or the 5% may migrated from 95% to 97%.. it will not matter.
What will REALLY matter is how the USA comes out, in the standing of nations. Will the world start to question that USA has actually recovered and how? NOT a “Coincidence” G20 wants REAL regulatory actions, not more USA snake oil from our Swineators and House of Reprehensibility, lock step to special interests orders. The USA to world is damaged goods. USA also shall we say “Damaged their goods” with the rampart corruptions across nation. Whole new recovery if world demands it’s pound(s) of (economic) flesh for repairs. I am sorry to say so but I expect the “new savings and frugality” buzz-attitude-actions by USA is about as solid as our history on energy use. AKA habits and rhetoric at $4 vse $2 gas. We have a whole generation(s) out here that for 20-40 years or more were weaned to charge it and be happy.. and 8% ROI is for suckers.. I see many flaws in the theory of new economic culture changes… as I am one to read history and learn from it..
Most spin is now from usual cheerleaders. Same bunch that said “Buy home now, invest now, put SS into stocks, etc.They are not real leaders, just the same ole worn out cheerleaders that were so busy, never took history, government or money, “Boring stuff. Recovery and continued savings frugality, well “rah, rah, rah, those courses are boring, rha rah rah, charge it team, charge it as we are nr 1, rah rah rah.
Doubt the priority of USA for it’s future.. College coaches making how much, pro players how much, investment by public in hi tech and cutting edge educated worker is how much? Rah rah rah.. lets here it for the goodness of the negative saving rates.be happy

We no longer own our money, our industry, our infrastructures, even out utility’s and let’s not even discsus energy, more and more cannot afford high tech educations see real wages cut and health care vanish. .
Anyone care to start a pool on when we go back to negative savings rates?

Posted by Chuck | Report as abusive

The current runup of the equity markets is troubling. As you mentioned, there is no REAL basis for it. I believe it’s just “traders” doing what they need and have to do. You can only sell for so long and inevitably the tide turns to purchasing. The problem is it won’t LAST. Just like late last year. everyone was saying “November was the botton”….WRONG….Now they’re saying March was the “bottom”….WRONG… Wall Street made and continues to make an economy that isn’t REAL. It seems we’ll always be at it’s mercy for prosperity or the lack of.

Posted by L Marceau | Report as abusive

For years the Yanks thought they could create jobs by having wars everywhere, good for contractors like Blackwater, catering
the 180K US military abroad. But war is morally wrong and they
are not real jobs. Just killings and blowing up people.
Now it is time to get a real techie industry to have real jobs.
They should make green cars, Iphone and laptops in the US

I have seen few economists and almost no labor econometricians take the U-5 or U-6 numbers seriously and use them for any serious analysis. The reason for this is that due to the way the survey is conducted these three categories have a lot of innacuracies and noise in the raw data the calculations are based on. The survey questions that allow the BLS to calculate the size of the labor force and total unemployment are well defined questions with well defined answers. But the questions used to find and calculate marginally attached workers and especially “part time employed due to economic reasons” are highly subjective and are therefore dependent on those answering the survey.

Posted by ZH | Report as abusive

Whoops, meant to say two categories in the second sentence of my previous comment. I was writing too quickly.

Posted by ZH | Report as abusive

it will be a long road back to prosperity in America, the road will not lead back to the site of the recent nuclear financial meltdown, the road will be paved by a renewed revamped creation of well paying manufacturing jobs, without these paving stones there is no road, all Americans cannot make their living blogging and serving lattes