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Slowtwitch Forums: Lavender Room:
Obama's Unemployment Problem--12% in the Future?

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chainpin

Nov 12, 09 6:58

Post #1 of 30 (332 views)

Obama's Unemployment Problem--12% in the Future?	Can't Post

I have followed Rosenberg for quite some time.

He is the extreme perma-bear on the economy.

After the 2001 recession, he was calling for death and destruction--it never materialized.

With that in mind, his views on unemployment, which are included below, should be be discounted somewhat, although probably not by much.

#12 is of particular interest.

For your consideration:

Gluskin Sheff economist David Rosenberg, formerly of Merrill Lynch, thinks the unemployment rate is going to at least 12 percent, maybe even 13 percent. Optimists, Rosenberg explains, underestimate the incredible damage done to the labor market during this downturn. And even before this downturn, the economy was not generating jobs in huge numbers. If he is right, all political bets are off. I think the Democrats could lose the House and effective control of the Senate. I think you would also be talking about the rise of third party and perhaps a challenger to Obama in 2012.
So here is what I gleaned from Rosenberg’s latest report (bold is mine):

1. For the first time in at least six decades, private sector employment is negative on a 10-year basis (first turned negative in August). Hence, the changes are not merely cyclical or short-term in nature. Many of the jobs created between the 2001 and 2008 recessions were related either directly or indirectly to the parabolic extension of credit.

2. During this two-year recession, employment has declined a record 8 million. Even in percent terms, this is a record in the post-WWII experience.

3. Looking at the split, there were 11 million full-time jobs lost (usually we see three million in a garden-variety recession), of which three million were shifted into part-time work.

4.There are now a record 9.3 million Americans working part-time because they have no choice. In past recessions, that number rarely got much above six million.

5. The workweek was sliced this cycle from 33.8 hours to a record low 33.0 hours — the labour input equivalent is another 2.4 million jobs lost. So when you count in hours, it’s as if we lost over 10 million jobs this cycle. Remarkable.

6. The number of permanent job losses this cycle (unemployed but not for temporary purposes) increased by a record 6.2 million. In fact, well over half of the total unemployment pool of 15.7 million was generated just in this past recession alone. A record 5.6 million people have been unemployed for at least six months (this number rarely gets above two million in a normal downturn) which is nearly a 36% share of the jobless ranks (again, this rarely gets above 20%). Both the median (18.7 weeks) and average (26.9 weeks) duration of unemployment have risen to all-time highs.

7. The longer it takes for these folks to find employment (and now they can go on the government benefit list for up to two years) the more difficult it is going to be to retrain them in the future when labour demand does begin to pick up.

8. Not only that, but we have a youth unemployment rate now approaching a record 20%. Again, this is going to prove to be very problematic for employers in the future who are going to be looking for skills and experience when the boomers finally do begin to retire.

9. The gap between the U6 and the official U3 rate is at a record 7.3 percentage points. Normally this spread is between 3-4 percentage points and ultimately we will see a reversion to the mean, to some unhappy middle where the U6 may be closer to 15.0-16.0% and the posted jobless rate closer to 12%. This will undoubtedly be a major political issue, especially in the context of a mid-term elections and the GOP starting to gain some electoral ground.

10. But when we do start to see the economic clouds part in a more decisive fashion, what are employers likely to do first? Well, naturally they will begin to boost the workweek and just getting back to pre-recession levels would be the same as hiring more than two million people. Then there are the record number of people who got furloughed into part-time work and again, they total over nine million, and these folks are not counted as unemployed even if they are working considerably fewer days than they were before the credit crunch began.

11. So the business sector has a vast pool of resources to draw from before they start tapping into the ranks of the unemployed or the typical 100,000-125,000 new entrants into the labour force when the economy turns the corner. Hence the unemployment rate is going to very likely be making new highs long after the recession is over — perhaps even years.

12. After all, the recession ended in November 2001 with an unemployment rate at 5.5% and yet the unemployment rate did not peak until June 2003, at 6.3%. The recession ended in March 1991 when the jobless rate was 6.8% and it did not peak until June 1992, at 7.8%. In both cases, the unemployment rate peaked well more than a year after the recession technically ended. The 2001 cycle was a tech capital stock deflation; the 1991 cycle was the Savings & Loan debacle; this past cycle was an asset deflation and credit collapse of epic proportions. And economists think that the unemployment rate is in the process of cresting now? Just remember it is the same consensus community that predicted at the beginning of 2008 that the jobless rate would peak out below 6% this cycle.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

SwBkRn44

Nov 12, 09 7:18

Post #2 of 30 (319 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

The guy loses points in terms of the potential accuracy of his claims with his suggestion of the "rise of a third party."

I've said it before and I will say it again, that's not going to happen here. As long as we have a plurality election system, the 2 party system is here to stay. When elections are done proportionally, you have third and fourth parties, coalition governments, etc. But that's not the U.S. system.

I respect and tend to agree with many third party candidates, but the best they can hope for is to bring an issue that is being ignored in the spotlight and hope one of the 2 major parties picks up their platform.

On top of the fact that we don't have proportional representation, so many issues boil down (or can be dumbed down) into 2 opposing sides, the Democrats take one side (pro-choice, gun control, etc.) and the Republicans take the other (pro-life, gun rights, etc.)

I am not making a statement about either pary here, just the system.

With regards to some of his other points:

8. Not only that, but we have a youth unemployment rate now approaching a record 20%. Again, this is going to prove to be very problematic for employers in the future who are going to be looking for skills and experience when the boomers finally do begin to retire..

That is certainly true, older people are either staying in the workforce longer, or reentering the workforce. Therefore, job turnover from those people leaving the workforce is lower. A lot of that is due in part to the declines of the stock market and property values. These were things people were counting on to be able to retire on, and now they can't. I can count several personal experiences of an employer who has an opening and a 17 year old kid applies and a 55 year old man applies. From a morality standpoint, the employer may favor the older person simply out of sympathy for the person's situation (as long as they are in no way physically limited).

9. The gap between the U6 and the official U3 rate is at a record 7.3 percentage points.

This is the reason I think we may see unemployment peak sooner, but then hold at that high level a little longer, in relation to the end of this recession than past recessions. Once unemployment does peak, all of these underemployed folks will first go back to full-time employment before the unemployed get work. If a factory owner has 20 staff working half shifts, he can bring these people back on full time (reducing underemployment) before he needs to hire new people (reducing unemployment).

Just remember it is the same consensus community that predicted at the beginning of 2008 that the jobless rate would peak out below 6% this cycle.

I am not sure who these people are, but I agree that whoever they are, such statements should certainly cloud anyone's opinion of predictions from those same folks in the future.

chainpin

Nov 12, 09 7:35

Post #3 of 30 (308 views)

Re: Obama's Unemployment Problem--12% in the Future? [SwBkRn44] [In reply to]	Can't Post

I would also say that anecdotedly, there continues to be layoff announcements by companies, some of them very signfiicant.(Johnson & Johnson for example)

Sprint just announced it is cutting 6% of its worforce (2,500 workers)--there are many others but these two struck me as quite large reductions.

On a longer term basis, the Obama tax policies--and future expected policies--are negatively impacting how companies are planning their future expansions.

This was just out from an executive at Emmerson Electric:

http://www.bloomberg.com/...amp;sid=a_EbBQyskKl0

�Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,� Farr said today in Chicago at a Baird Industrial Outlook conference. �Cap and trade, medical reform, labor rules.� . . . .

Companies will create jobs in India and China, �places where people want the products and where the governments welcome you to actually do something,� Farr said.

�What do you think I am going to do?� Farr asked. �I�m not going to hire anybody in the United States. I�m moving. They are doing everything possible to destroy jobs.�

Now, you may say that this is just rhetoric and that those jobs were never destined for the US to begin with, but, I can tell you that the analysts that cover this space that I talk to(and work with) report that many executives are viewing the environment here in the US is forcing them to look at other geographies for expansion.
Again, this is more of a secular problem for employment in this country, and one reason why the so called natural rate of unemployment is going to be much higher than the old rule of thumb of 5%.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

(This post was edited by chainpin on Nov 12, 09 7:37)

drake

Nov 12, 09 7:53

Post #4 of 30 (293 views)

Re: Obama's Unemployment Problem--12% in the Future? [SwBkRn44] [In reply to]	Can't Post

Another key driver of youth unemployment being displaced by older workers is the rise in the minimum wage. Case in point, my son worked at a golf course this summer. In the past the main employees working the carts, the range, and the snack shack were high school kids. Not the most reliable element, granted but definitely a rite of passage. The minimum wage in MA is $8.00. Combine that with tips and free golf, the job became very attractive to college students and this year the college students were displaced by men out of work looking to supplement unemployment or who had run out of unemployment.

Once I became aware of the idea I have begun to see this in other typically low end positions that I had not noticed this before.

The ramifications of this are not completely clear but it isn't going to help these kids much in terms of paying for college, etc. etc as they are displaced from the workforce.

big kahuna

Nov 12, 09 9:15

Post #5 of 30 (267 views)

Re: Obama's Unemployment Problem--12% in the Future? [drake] [In reply to]	Can't Post

You guys are gonna put a tear in Slowman's beer with all this talk of 12% unemployment. To hear him talk, the jobs are going to flow like honeyed wine by mid-summer of 2010 ;-)

T.

chainpin

Nov 12, 09 9:27

Post #6 of 30 (261 views)

Re: Obama's Unemployment Problem--12% in the Future? [big kahuna] [In reply to]	Can't Post

In Reply To:

You guys are gonna put a tear in Slowman's beer with all this talk of 12% unemployment. To hear him talk, the jobs are going to flow like honeyed wine by mid-summer of 2010 ;-)

T.

You know, when this topic came up in one of the other threads related to the 2010 elections, I was surprised at the bullishness of people with regards to employment trends.

If we were to simply follow the trajectory of previous recoveries, unemployment wouldn't peak until 2011 or so.

I myself was laid off back in 2003, well after the "official" recession ended.

For anyone without a job during this recession, I hope they don't read this forum, for if they do, they will certainly leave here with a inflated sense of economic optimisim which will no doubt cause them great pain and suffering in the future.

Of course, I caveat the above by adding--it's really only those economic threads that Slowman participates in that they have to be concerned with... : )

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

Johnny99

Nov 12, 09 9:37

Post #7 of 30 (255 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

The government will change the way unemployment is calculated long before they allow it to get to 12%. Figures don't lie but liars figure.

chainpin

Nov 12, 09 9:48

Post #8 of 30 (244 views)

Re: Obama's Unemployment Problem--12% in the Future? [Johnny99] [In reply to]	Can't Post

In Reply To:

The government will change the way unemployment is calculated long before they allow it to get to 12%. Figures don't lie but liars figure.

They already do manipulate the number, it's called the birth-death ratio.

But not to worry, Barry is going to hold a summit to get to the bottom of this unemployment problem:

http://www.foxnews.com/...obs-summit-december/

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

big kahuna

Nov 12, 09 10:31

Post #9 of 30 (230 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

That's the first sign of desperation. The "jobs summit." A group of politicians and wonks who'll sit around and reinforce their prejudiced conceptions about what should work according to the prejudices holding sway in their worldview. I'm waiting to see if they'll bring in a few small business owners to get their ideas on what works and what doesn't. If all they do is serve tea and crumpet and listen to the same folks (Geithner, Summers, Romer et al) who helped to get us into this in the first place, what sort of credibility should they be expected to have?

T.

SwBkRn44

Nov 12, 09 10:37

Post #10 of 30 (222 views)

Re: Obama's Unemployment Problem--12% in the Future? [Johnny99] [In reply to]	Can't Post

The government will change the way unemployment is calculated long before they allow it to get to 12%

No they won't.

jkca1

Nov 12, 09 10:40

Post #11 of 30 (217 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

The complaint about jobs going overseas is an old one. I remember US car dealers literally inviting people to smash Japanese cars with sledgehammers in the 70's and some nuts actually shooting at cars on the Freeway.

If we can't perform jobs for less here than what it costs overseas why would a businessman pay more? It's Capiitalism 101. You compete or die. If people think this is a bad thing then they should come out against Capitalism and pro-Sociallism or at the very least demand job protectionism aka Socialism.

"They are all crooks, both sides of the aisle."

chainpin

Nov 12, 09 11:04

Post #12 of 30 (205 views)

Re: Obama's Unemployment Problem--12% in the Future? [big kahuna] [In reply to]	Can't Post

Part of the reason that, Big Bad "I like em young" Bill Clinton, was on the Hill recently was to remind people that the economic newsflow for Obama is not going to get any better any time soon, and that they better get their shit together with healthcare ASAP.

You can bet he understands the problem that the unemployment number poses for Obama and the Dems--its only going to get worse.

The employment report for November will be released December 4th, although I haven't seen any concensus estimates for the unemployment rate, it would not be a stretch to see a 10.5% number, or higher.

Wasn't the stimulus supposed to top us out at around 7%.

Oh, silly me, I tend to forget that we needed MORE stimulus--that's why Obama's economic policy has failed.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

(This post was edited by chainpin on Nov 12, 09 11:09)

big kahuna

Nov 12, 09 11:25

Post #13 of 30 (194 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

The employment report for November will be released December 4th, although I haven't seen any concensus estimates for the unemployment rate, it would not be a stretch to see a 10.5% number, or higher.

Which is why he and Axelrod are going to try to head it off by promising a jobs summit that won't come up with anything meaningful that'll help create jobs. It's a dog and pony show, for the most part. Also, the president's fearful that any bad employment news is going to make getting a healthcare "reform" bill through the Senate once the new figures are released more difficult, which is why he sent Billy Bob up to the Hill to try to cajole Senate Democrats into squeezing out something before then. He thinks he can manipulate the ensuing bill reconciliation conference to his ultimate benefit and have it all wrapped up in a neat, tidy bow before people start taking out the piss poor employment figures on him.

T.

chainpin

Nov 12, 09 11:39

Post #14 of 30 (186 views)

Re: Obama's Unemployment Problem--12% in the Future? [big kahuna] [In reply to]	Can't Post

In Reply To:

Yep, but the problem is that the factions within the Democratic party are NOT even close to being on board with all the elements of the bill.

Time is not on their side--they know it and the far Left knows it.

You know shit is hitting the fan when the Lefty bloggers are going bonkers on the Blue Dogs, injecting the term "corporate whores" into the political nomenclature in response to their actions.

Most of this angst involves contemplating the blood boiling concept of the so-called co-op trigger, plan B if you will.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

drake

Nov 12, 09 11:39

Post #15 of 30 (186 views)

Re: Obama's Unemployment Problem--12% in the Future? [jkca1] [In reply to]	Can't Post

Actually if Capitalism were allowed to work more jobs would remain in America.

Perhaps you should read the comments by the CEO of Emerson yesterday. He is actively moving jobs to India and Asia where, he says, countries actually want people to work. The cost of jobs in the US is rising exponentially if you include cap and trade, healthcare, and the various state and local taxes that are being thrown on top of companies.

His speech was one of the most direct, and most upsetting, speeches I have heard from a top business person in a long time. Of course the White House quickly issued it's denial stating everything they are doing to make it easier for companies to hire.

I see absolutely no way for Slowman's prediction to come true. I hope I am wrong.

jar1635

Nov 12, 09 11:46

Post #16 of 30 (177 views)

Re: Obama's Unemployment Problem--12% in the Future? [SwBkRn44] [In reply to]	Can't Post

doesn't the way that they manipulated the number of jobs "saved or created" cause you have at least a little less faith in their honesty?

chainpin

Nov 12, 09 11:49

Post #17 of 30 (174 views)

Re: Obama's Unemployment Problem--12% in the Future? [drake] [In reply to]	Can't Post

In Reply To:

Liberals need to have the phrase "If you tax it, you get less of it," tattoo'd to their asses.

Unfortunately, no amount of real word evidence will convince them that this is true.

Economic illiteracy is a disease with no cure for most of them.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

SwBkRn44

Nov 12, 09 11:52

Post #18 of 30 (168 views)

Re: Obama's Unemployment Problem--12% in the Future? [jar1635] [In reply to]	Can't Post

Not at all, one is an Administration number that they have created, the other comes from the Bureau of Labor Statistics.

big kahuna

Nov 12, 09 11:55

Post #19 of 30 (167 views)

Re: Obama's Unemployment Problem--12% in the Future? [drake] [In reply to]	Can't Post

Of course the White House quickly issued it's denial stating everything they are doing to make it easier for companies to hire.

Yeah, that hoped-for "Economic Patriot Act" is going to really jumpstart the old engine if it were ever enacted, wouldn't it?

The below is a video link to a little tutorial by Dan Mitchell of the Cato Institute. He explains why a government takeover of health care, as envisioned by the bill the House recently passed, will destroy the federal budget:

http://www.youtube.com/watch?v=7oUx0S6Foss

Unfortunately, there's a whole herd of people running things these days that really believes they're capable of running health care and the economy. This could end up being the greatest mistake any government has made in our history, but they don't want to listen to more reasonable people, it seems.

T.

peter826

Nov 12, 09 11:55

Post #20 of 30 (166 views)

Re: Obama's Unemployment Problem--12% in the Future? [chainpin] [In reply to]	Can't Post

I'm not sure this is Obama's problem -- perhaps OUR problem?

Jobs have been leaving this country for decades now. The fact that the Emerson CEO is bent out of shape about legislation that isn't even passed is a farce, considering how many jobs they've offshored during prior administrations. Seems like an excuse to continue doing what they've been doing forever now..

I'm not holding out hope for ANY manufacturing jobs of things like consumer goods, but then, that trend has been going on since the 1990s, or earlier.

Clearly we're in the midst of a shift away from a manufacturing base to more of a service/idea economy. Again, that's been happening for awhile now, and isn't something that sprung up because of Obama.

Though...I do agree he'll pay the price in the end, if things don't pick up...

drake

Nov 12, 09 12:01

Post #21 of 30 (158 views)

Re: Obama's Unemployment Problem--12% in the Future? [peter826] [In reply to]	Can't Post

Quote:

The fact that the Emerson CEO is bent out of shape about legislation that isn't even passed is a farce,

It is not a farce and to dismiss it as such is a big piece of the problem. It is just this sense of anti-business hyperbole and activity that hurts American workers. I like to remind people constantly that business is not evil, business is made up of American workers. Screw business and you screw yourself.

Has anyone in Washington State noticed that Boeing is moving their new plant out of that state SPECIFICALLY because of the high taxes, the anti business Workers Comp laws and the poor climate for hiring? South Carolina is the recipient of the prize. Certain industries will remain in the US but there is NO reason to lose all the jobs we are losing at the moment and will lose in the future.

SwBkRn44

Nov 12, 09 12:02

Post #22 of 30 (156 views)

Re: Obama's Unemployment Problem--12% in the Future? [peter826] [In reply to]	Can't Post

I'm not sure this is Obama's problem -- perhaps OUR problem?

Jobs have been leaving this country for decades now.

The fact that the Emerson CEO is bent out of shape about legislation that isn't even passed is a farce

Though...I do agree he'll pay the price in the end, if things don't pick up...

Very well said, 4 great points made without being tinted by partisan politics. This post should be saved and the thread locked at this point because it is a perfect summary of the situation.

big kahuna

Nov 12, 09 12:07

Post #23 of 30 (152 views)

Re: Obama's Unemployment Problem--12% in the Future? [SwBkRn44] [In reply to]	Can't Post

You're just looking for a way to keep the focus off your guy ;-) Don't worry; I'd have asked for the same thing if a similar post had been created during the Dubya years.

T.

chainpin

Nov 12, 09 12:10

Post #24 of 30 (145 views)

Re: Obama's Unemployment Problem--12% in the Future? [peter826] [In reply to]	Can't Post

In Reply To:

Well, look, when unemployment is at the levels it is now, every policy coming out of Washington needs to be "pro-job."

Obama's policies are anti-jobs, and the Emmerson exec is not the only corporate leader saying this.

To turn things around you need to see postive change "at the margin."

Sure there is a secular trend of jobs going overseas, but that is not happening at the margin, that is the trend.

Those companies that do make the economics work, will keep employees here, problem is, they ARE already at the margin.

In other words, had Obama's tax policies been in place previosly, unemployment would have been higher, because that marginal company is going to say fuck it, it's just not worth it.

That is what is happening now--these policies will be the tipping point.

To what extent, we do now know.

The bottom line is that the Emmerson CEO is not going to make a decision that destroys wealth for the shareholders.

It's the same logic behind why many large companies have re-incorporated overseas recently.

"I really wish you would post more often. You always have some good stuff to say. I copied it below just in case someone missed it." BarryP to Chainpin on 10/21/06

SwBkRn44

Nov 12, 09 12:12

Post #25 of 30 (143 views)

Re: Obama's Unemployment Problem--12% in the Future? [big kahuna] [In reply to]	Can't Post

Be careful there, I alread caught you doing a "But...but...but...Bush" once. I think you are permanently banned from using that as a comeback since you have now done it yourself ;-)

As for keeping the focus off Obama, I am not stupid, I know he'll pay for the unemployment numbers if they are still high in 12 and 36 months. But as the other poster said and I copied, it's not his problem, it's our problem. Hopefully people can see beyond party politics in that respect.

I've said this before and I will say it again, I despised Bush as a President, but my love of country outweighed my hatred of the President. I would have much rather seen things turned out better over the past 8 years and have him received the credit for it, than for him to run things into the ground just so I could say, "I told you so."

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