In order for the U.S. economy to go roaring right back to the 3%-4% long-term growth the bulls are looking for, consumer spending will have to rebound.
Consumer spending is still 70%+ of the economy, and it’s hard to get a supertanker cruising along at top speed if 70% of its power is removed.
In order for consumer spending to come roaring back, however, one critical thing has to happen:
Consumers have to be employed
If consumers don’t have jobs, they don’t have much disposable income. They also can’t borrow as easily (because, at least temporarily, banks have decided not to be stupid). And if consumers aren’t employed, companies that sell to them can’t grow as quickly, which affects the other 30% of the economy.
And how is consumer employment going? Badly.
Read the entirety of the lengthy exposition on the employment situation from Henry Blodgett.
Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000. According to the Labor Department’s latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed.
And even though the pace of layoffs is slowing, many companies remain anxious about growth prospects in the months ahead, making them reluctant to add to their payrolls.
“There’s too much uncertainty out there,” said Thomas A. Kochan, a labor economist at M.I.T.’s Sloan School of Management. “There’s not going to be an upsurge in job openings for quite a while, not until employers feel confident the economy is really growing.”
The NYT article goes on to illustrate weakness in nearly every sector of the economy. The only sectors that are hiring are government and its handmaiden industries, healthcare and education. I’m beginning to wonder if employment is not a lagging indicator when the economy is as dependent on retail sales as ours is.
I’ll also take this opportunity to suggest something I’ve mentioned in the past: an L-shaped recession may just be an economy that’s returned to trend, sluggish growth based on weak fundamentals which appears to be a decline since it follows a bubble.