Monday, August 10, 2009

Unemployed to US Economy: "Go on without me..."

I am concerned about the recent optimism in the financial markets. Sorry. Not cool to be a pessimist. But I am not - just trying to be a realistic optimist here.

We lost 245k jobs in the month of July. This made markets happy because it was less than expected (325k), and fewer than the prior month. Around January of this year, we were losing ~750k per month. So yeah, improving, but not exactly good.

Is this cause for optimism? How can we distinguish between optimism and an evaporation of pessimism? Are they the same thing?

What bothers me are the following details, below the headlines of the news release:

  • the only growth in new jobs is among the 55 and up crowd - baby boomers who, under other circumstances, would no longer be in the job market.
  • nearly 5MM people have been out of work for more than HALF OF A YEAR
The second point leads me to wonder, when does fatigue set in? The unemployment rate went down this period (9.4%) but this is expected to be anomalous in retrospect; unemployment is expected to break 10% within the year. Since the survey methodology only considers "unemployed" people to be those A) without work and B) actively looking for work, how many people have given up? How many are tired of sending resumes out multiple times a week, getting no replies, and simply focusing on other things until there are signs that jobs are available?

I love this analogy from Planet Money: The foot is on the pedal, and it's floored (Federal Funds rate @ 0% and other stimulus). The car (our economy) is rolling backward. But the speed at which we are rolling is slowing. And that's enough to get us where we're going? hmm...

I am not yet convinced. What say you?