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.