11 Million Job Buffer From Efficiency And Part Time Workers Before Even One Person Needs To Be Rehired

Tyler Durden's picture

A startling observation out of David Rosenberg is that with the current unemployment number (whatever it may be: 10.2%, 17.5%, 90%), even assuming an end to workforce outflows, there is a buffer equivalent to almost 11 million people, consisting of increased worker productivity and massive newly-created temporary positions, that can be drawn upon before even one person of those laid off recently, has to be rehired. This is disastrous for the Obama administration, especially at a time when it is actively speculating on Stimulus #2 in order to spur any kind of job creation ahead of mid-term elections.

We haven’t yet hit bottom on employment but that will happen at some point. Employment is not going to zero, of that we can assure you. 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.

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.

But to consider the upward inflection point is pretty moot: after all, second derivatives in the jobless picture are accelerating in the wrong direction. How much longer, before one can hope to see even one positive employment read?

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. Thanks for coming out.

And here are the very troubling stats that nobody in the pro-administration mainstream media would dare to show to the general public, whose displeasure with Obama's economic policies rises each day (although not its market manipulative powers). 

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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. 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.

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m.g. turner's picture

Mr. Rosenberg is the man. Can we as a Nation handle the truth?? Nope.

Divided States of America's picture

Love Rosie but hes getting a bit desperate, using the same thing over and over again with a different perspective to make his case. I emailed him a few times and he actually responded back, which was nice of him but after I called him desperate, he never did anymore. Anyhow he's right but definitely his credibility has gone down all the way through this melt up. 'Breakfast with Dave' commentaries has now become 'Angry with Dave'.

reading's picture

I would disagree that he is or sounds desparate.  Emphatic, yes, but as you acknowledged he is correct.  The numbers and facts don't lie no matter what the liquidity does to the market.  If you'll recall, he has a pretty thick skin as many called him wrong before, yes early but I'd rather him watching over my investments than one of the flatuence-spewing perma bulls hopped on red bull spending every waking moment talking up how fundamentally strong this rally is on CNBC. 

Divided States of America's picture

You are right but ultimately, he was wrong, like I was, for being negative on this market and losing my pants. At the end of the day, do you reward a PM who did the wrong thing but made money or someone who called it right after the fact but cost investors money. Not trying to discredit him but people only care about performance nowadays.

But he is a strategiest and not a trader so thats not his job to make money but provide factual and historic data and make a sense of whats going on. And I agree with his assessment albeit it his timing is way off.

Anonymous's picture

Interesting discussion, I mostly come down on the side of Divided.
The gov put interest rates down to 0. Invest in something...anything, or lose. The gov came up with hokey spending schemes whose byproduct was a higher stock market.
Stupid? Counter-productive? Dishonest, manipulative,...?

Doesn't matter. A commentator/historian should be able to figure this kind of stuff out.

I continue to enjoy reading his stuff, of course!

lizzy36's picture

Liesman giving a lecture on a quarter and a basketball as it relates to unemployment. 

Can someone please shove that quarter up his ass and that basketball in his mouth!!!!

Anonymous's picture

How about the other way around?

Anonymous's picture

the coin will be good for him to bite down on

Green Sharts's picture

I watched a little bit of Kudlow's program last night.  Liesman and Michael Pento were sitting next to each other on the set.  Pento was critical of the Fed's easy money policy and Liesman was so angry he could barely contain himself.  Whenever anybody says something negative about Treasury or the Fed you can see Liesman tighten up as if they're attacking him personally.  I have never seen such a shill/apologist. He gets such a woody out of being used as a mouthpiece for the Fed and Treasury that he doesn't even know he's a dupe.  He thinks he's independently coming to the same conclusion as the Fed and Treasury on every policy issue and comment.

Here's the clip:


Classic Liesman comments:

"The Fed would argue that it wasn't its policies 7 years ago that created the bubble.  Whatever happened to personal responsibility?"

"We are not actively depreciating the currency."

MsCreant's picture

Sort of a dimented ball machine...

Put in quarter, out comes ball?

Fish Gone Bad's picture

As in "Toll Booth Willie" by Adam Sandler?

Anonymous's picture

It's great to start the day with a good laugh.

And what about the additional 200 million jobs that are at risk from peoples dream jobs not being fulfilled. Those people may walk out tomorrow and them we're all doomed.

bugs_'s picture

Its worse.  Factor in the H1B's which
have been layed off and did not self
deport contrary to law.  Factor in the
H1B's which overstayed their three years
contrary to law.  Factor in the F1 and
F2 visa illegal workers.  Ditto other
abuse of visas.  Factor in the millions
of former illegals waiting to return.
Yes its much worse for the regular
American and they realize it now.

Anonymous's picture

Are these cats reflected in U6?

aswipe's picture

I want to see a celebrity death match between Santelli and Leisman.... now that would get some ratings.

aswipe's picture

I want to see a celebrity death match between Santelli and Leisman.... now that would get some ratings.

aswipe's picture

Dangit..itchy trigger finger.

Anonymous's picture

Funny thing - for the last 10yrs US business offshored jobs - the FED / Wall St. booked "Productivity" [fewer US workers doing more] - thus, justifying the low interest rate policy for so long. Apx. 60% - 80% Margin still exists with offshore today - so, lots of room. Further, hedging / shorting the Dollar has become more efficient.

What I am saying - a US "Tank the Dollar" plan will not translate into US Jobs; OR US inflation - long term, such a policy will destroy the US and the world - as the order is changed.

Ignorance in not knowing ones strength: having the global reserve currency. Stupidity in not using that bennefit [low cost of capital / access to global savings] to empower private innovation and global financial market domiance.

sethstorm's picture

How about removing the ability to discriminate against the long-term unemployed?

Just a thought, that's all.

. . .'s picture

Tyler:  A startling observation out of David Rosenberg is that with the current unemployment number (whatever it may be: 10.2%, 17.5%, 90%), even assuming an end to workforce outflows, there is a buffer equivalent to almost 11 million people...  This is disastrous for the Obama administration, especially at a time when it is actively speculating on Stimulus #2 in order to spur any kind of job creation ahead of mid-term elections.


Why doesn't Obama spend the stimulus money he already got out of Congress before asking for more money?  In september, Obama had only spent about 20% of the stimulus funds.

Giving Obama more money after he only spends a fraction of the first batch is like rewarding failure.  It's like giving Richard Pryor in Brewster's Millions the big prize money if he had failed spend the $30 million teaser, he's supposed to spend to get the big money.

deadhead's picture

Why doesn't Obama spend the stimulus money he already got out of Congress before asking for more money?  In september, Obama had only spent about 20% of the stimulus funds.

oh, it will be spent.  rahm just timing it right for max benefit leading into mid term elections. 

Anonymous's picture

Anybody with a clue knew Obama was full of it when he said "most" of the money would go "immediately and directly" to the private sector to create jobs. This was never meant as a simple job creation program, it was designed to be a re-election mechanism for politicians.

They blew it somewhat when they predicted the U3 would hit the ceiling at 8%, but their numbers clearly indicated that they expected the rate to drop starting in 2010. Of course, that's assuming the states don't use the money for the same purpose as they did this past year, which was to simply shore up their overdrawn budgets.

Anonymous's picture

I think the government will restate figures in order to account for temps coming back to work

berlinjames02's picture

I love Rosie. He's a refreshing breath of reality.

I think it's comical that most believe this is a typical recession. Do they not see the massive deleveraging occuring on corporate and personal balance sheets? Not a good sign for a 70% consumer economy. The leverage has been building for years; we're only 18 months into this and people believe it's over? The Fed's 'kill the dollar' liquidity program is the only thing keeping the markets up.

At first I was agnostic to QE. Now I'm shaking in my boots. I really thought Bernake would stop after prices stabilized. With the world swimming in dollars and the markets shooting the moon, I wonder if they'll ever pull back. Why should they? The Fed/Treasury/Banks all win in the process.

I just don't see the long term prospects for growth to pull us out of this mess. Thinking of Modigliani's 'life cycle hypothesis', it would seem we're also running into a demographic brick wall (as well as the credit wall). Boomers retiring and withdrawing from IRAs/401Ks will surely put downward pressure on the market. How much growth was contributed by women entering the workforce in the post-War era? (I believe alt/energy efficiency is one source, but even that seems like the electric slide: two steps back, one step forward, turn, slide.)

Who knows where this will end? It's definitely going to be painful.

Anonymous's picture

About demographics:
Yes, the US will also have some probs with the large number of retiring boomers, but compared to Japan and most European states it's a lot less severe as here the workforce is not in permanent decline.
I grew up in Germany and their demographic situation is really hopeless.

Anonymous's picture

Boomers are not going to retire because they can't. They have been so screwed, and have lost all means of retiring because many have lost so much through their IRAa and 401ks. Boomers have to anticipate that Social Security will not be there for much longer.

sgt_doom's picture

Ditto, berlinjames02.

We reached critical mass with regard to jobs offshoring, so while there will still be some jobs to be offshored, the effective zero job creation of the private sector during the last 10 years (zero job creation in the U.S., that is) proves this unquestionably.

While many still proclaim they know the answer, or why doesn't the administration do this or congress that, it is obvous the program is for America to be another of the low-wage countries, falling into the "serf belt" of the planet.

The debt deleveraging should require at least three decades or more, and anyone who claims differently simply hasn't been reading the numbers.

Mortgage lenders and construction workers employed on those mortgage lending projects were just high-paid temp jobs, with the remainder of the temp jobs no longer in the USA!

Unfortunately, things are soooooo bad I can't even begin to predict what will occur, all I can surmise is that we are witnessing the end of capitalism.

Anonymous's picture

But has he factored in the effect of retiring boomers? We're headed into a period where the workforce if going to become smaller at an increasing pace. Perhaps that will offset some of the excess supply currently on tap?

Mad Max's picture

Retiring boomers?  Do you live in the US?  Between decimated 401k/IRA plans, wobbly at best pensions and a very uncertain economic outlook, not many boomers will choose to retire if it's only an option, no matter how much they would like to.  The boomers who planned to retire at 62 and golf for the next 30 years will probably be working to 75 and stop only when forced.  Barring some magical rise in the market that actually sticks and convinces everyone that it's real.

longjohnshorts's picture

Agreed.  Or, they'll all try to unload their homes -- whether McMansions or McMuffins -- at the same time, putting more downward pressure on prices.

The economic malaise is going to linger for years. Govt policy might ameliorate things from time to time. But, the bottom line is: 1) We have enormous structural problems in the U.S. (over-leveraged, too much capacity, uncompetitive workforce), and: 2) China is NOWHERE done eating our lunch. They've taken over low-end consumer goods; now they'll go for higher-end goods and industrial products. As long as the renminbi is pegged to the dollar, we're screwed (and so is Europe).

Anonymous's picture

Obama can't spend the already allotted stimulus money, some entity somewhere needs it to study the anal cavity of the American taxpayer to see how much more will fit in it before erupting.

ACjourneyman's picture

Obama can't spend the already alloted stimulus on new projects, some goverment agency will lose funding for testing the anal cavitys of american taxpayers and on ways to increase it size and they can't have that.

lovejoy's picture

By chance, does any one have a link to Neal Soss' (Credit Suisse) most recent Employment Report ... I believe it is dated November 6. Heard him on Bloomberg. Talked about a 5 to 10 structural change in employment. Maybe 10% unemeployment is going to become the "new normal".

sgt_doom's picture

If one goes by the same qualifiers as used in the Great Depression, and ignores all those "excluded categories" today, we are easily experiencing at least 34% real unemployment.

Anonymous's picture

Mad Max is dead-on, baby boomers got nothing left, will be working forever.

Anonymous's picture

The boomers who are (will) retire are government employees whose pension payments are almost equal to their last year's salary. Exactly where will the pension money come from that all units of government - municipal, state, federal - have agreed to pay?

Mad Max's picture

Your poor government employees must really be hurting.  Around here their "pensions" generally seem to exceed their last year's salary.  And a lot of them "retire," take a month off, then come back to the same job with some new title (sometimes "consultant," sometimes more permanent) making the same or more regular pay as they did before PLUS getting their enormous pension.  Goes on all the time here and across much of the USA.  It's corruption plain and simple.  At some point the public will start catching on to the large number of "retirees" who have a HS diploma and yet draw a 1/4 $million annual paycheck from the bankrupt local government.

Anonymous's picture

To add an observation,I see a large developing underclass of young people that are dependent on some type of govenment "paycheck" just to survive.It is very distressing because they are being taught this way of life, and see nothing wrong with the idea.

Anonymous's picture

Jimmy Carter's looking awfully good these days

Anonymous's picture

where's George Bush in all this ..... can't Obama blame him 1 or 20 times more for this mess ?!?!?!?!?!?

Anonymous's picture

• Many people see technology as a solution to some of the problems that exist on our planet. It’s true that technology can be used for good, but with new developments come new challenges issues. The digital divide is one such issue, one that people are actively trying to overcome.Jimmy