After the loss of nearly 600,000 jobs in January the unemployment rate has hit 7.6%, the highest since fall of 1992:
The U.S. economy lost another 598,000 jobs in January, a larger than expected decline that highlighted a weak global economy and the pressure building on companies to cut costs and payrolls.
It is the largest one-month job loss since December of 1974, and pushed the unemployment rate to 7.6 percent, from 7.2 percent in December.
That is the highest unemployment rate since the fall 0f 1992, with 11.6 million people out of work — a headline number that is bound to figure into ongoing debate in the Senate today over the Obama administration’s proposed economic stimulus package.
U.S. businesses and institutions have shed jobs now for 13 consecutive months, and the increasing pace of the job losses may indicate worse to come. Since the current recession began in December of 2007, 3.6 million payroll positions have been lost, with about half of that decline coming in the last three months, according to data released this morning by the Labor Department.
That’s troubling enough by itself but, as Chris Isidore of CNN correctly points out, it’s not the more troubling problem:
NEW YORK (CNNMoney.com) — January was one of the worst months for layoffs ever, with nearly a quarter-million job-cut announcements grabbing headlines.
But the real problem in the U.S. labor market today isn’t layoffs. It’s a hiring freeze that is gripping most work places – and has not gotten nearly as much attention as the job cuts.
“The hiring rate has caved. That’s why the job market is as bad as it is,” said Mark Zandi, chief economist with Moody’s Economy.com. “Given this low hiring rate, unemployment would still rise even if layoffs were falling.”
That may sound redundant or circular but it’s not. Our problem is not simply that the economy is shedding jobs at a frightening rate but that the rate at which it’s creating new jobs is very phlegmatic and has been for nearly a decade.
I continue to feel for those who’ve lost their jobs and I hope I don’t sound heartless when I say this but 7.6% was about where the unemployment rate was back when I was studying economics. I have a vivid recollection of my economics professor referring to that as being quite close to full employment and that anything lower would be likely to spark runaway inflation.
Attitudes towards the unemployment rate vary over time, in different places, and with circumstances. I don’t think it’s excessive to say that Japan’s economy is in a fullblown depression, the unemployment rate there is something like 4.4%, and they’re in a panic because it’s so high. Germany’s unemployment rate is around 8% and they’re rejoicing because it’s down from the 12% they had in 2006.
I can’t help but wonder if we’re not thinking about the jobs problem here wrong. Jobs in construction and retail have been kept artificially high here for a long time on the basis of borrowing spurred by a combination of mistakes and fraud. We’re losing jobs in the financial sector, construction, and retail because we’re enormously overinvested in those areas.
The question is where will the new jobs come from. If the government sector could be the primary engine for creating new jobs indefinitely the Soviet Union would be the world’s economic powerhouse.
Ideally, I guess, they’d come from new industries created by new technologies that result in higher productivity, raising everyone’s living standards (if not incomes). The financial sector overinvestment is a real bear to solve as well; it probably has a mix of causes, including the massive rise in free trade and foreign investment flows (since a lot of the world’s major banks are American), and possibly the fact that taxation in the US is lower on investment income with regards to capital gains than on “normal” income.
Other than that – I don’t know. You can only take extensive growth so far (as the Soviets found out); you need intensive growth to keep living standards raised – or you need to shrink your population and cause your income to go up that way.
As for different tolerance of unemployment, that’s a good point. Of course, in the German’s case, it’s not so bad in terms of effects on human livelihood as it is in the US; they have a strong welfare sector that smooths over the edges. I’m curious, though, as to what separates them from the Danes – the Danes have a strong welfare state, too, but their unemployment isn’t as bad as Germany’s. I’m guessing something related to workplace regulations – last I checked, it is very difficult and costly to fire employees in Germany.
I know this is just snarky, but c’mon.
Yesterday:
“The only thing we have to fear, is fear itself.”
Today:
(Forgive my taking liberties) “Your ass is grass, you’re all going to be unemployed unless you support my bill, filled as it is with protectionism, pork, faves to my buds, social engineering and bigger government…. or else.”
This is just awful. Exactly the rookie/cheesy/political error those of us not mesmerized with Obama feared.
We are doing the exact wrong thing: a lurch to government, the guys who largely got us here. We have no shortage of government, people. Haven’t for 40 years. Release the beast that is capitalism. Imperfect as it is (and we all know it is). But it is the only hope to grow our way out of this mess. But we need growth. Capitalists will find a way, they always do. And when they grow our way out………people can grouse about how much money they made doing it, instead of thanking them. Same as it ever was.
Reagan didn’t listen to Lester Thurow, the Krugman of that era. The results were spectacular. Pray that Obama and the Krugmanites fail.
However, I’m not optimistic.
Drew:
I just love hearing lectures from members of the party that drove us into this ditch.
The GOP took a massive surplus and turned it into a massive deficit. The GOP produced net zero jobs over the last 8 years. The GOP produced net zero rise in middle class incomes or living standards. The stock market? Right about where it was when the Democrats left the White House.
So by all means, tell us, do, what we should do to clean up your party’s mess.