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Number of Discouraged American Workers Hit Record High: QE3 = A Matter of When
By Dian L. Chu, EconForecast
The latest U.S. Labor Department data indicated that non-farm payroll added 103,000 jobs in December, which is far short of expectation, but the unemployment rate somehow managed to fall sharply to 9.4% (from 9.8% in November) far exceeding expectation.
103k Jobs Not Enough To Drop Unemployment Rate
The current consensus is that the U.S. economy would need to create 150,000 to 175,000 new jobs each month in the next 5 years or so, at minimum, just to restore the 8+ million jobs wiped out by the Great Recession.
Since the nation added only 1.1 million jobs in total last year, or averaging 94,000 jobs a month, the 103,000 new jobs added, coupled with a 0.4% drop in unemployment rate in December, simply does not make much sense.
Totally Discouraged
Nevertheless, a closer look at data the Bureau of Labor Statistics (BLS) tells that the drop in unemployment had very little to do with newly created jobs. Instead, it was primarily due to 260,000 workers dropping out of the labor force. As a result, the labor force has shrunk by 246,000 from the pre-crisis 2007 level (The U.S. labor force average growth rate is supposed to be around 0.8% per year from 2000 to 2050, according to Joel Kotkin, a scholar on urban development.)
Furthermore, not only the number of discouraged workers over job prospects hit a record high (since 1994, the earliest year the data is available) of just over 1.3 million (Fig. 1)--more than the number of jobs added in 2010--but the labor participation rate also plunged to a 25-year low of 64.3% ....post-recession! (Fig. 2).
Most Disturbing – Long Term Unemployed
Most disturbingly, the average number of weeks people remain unemployed also has risen to 34.2 weeks in December vs. 33.9 weeks in November, with 6.4 million jobless people classified as long-term unemployed, i.e. without a job for 27+ weeks.
The All Inclusive Jobless Rate Could Be 11%+
All these suggest there is a large number of frustrated workers who left the labor pool but unaccounted for in the unemployment rate calculation. That means the all inclusive jobless rate could easily be 11% or more, instead of the 9.4% flashing in headlines today.
Needed - 300k Jobs Per Month
Overall, the latest employment report seems to reflect a painfully slow-recovering, but still confused labor market. Large corporations are hoarding cash reluctant to hire or invest fearing uncertainties ahead, while small business still strapped for cash and credit can’t afford to hire since business is still slow.
Most economists estimate that that in order to make a meaningful dent in the jobless situation while keeping up with the labor force growth rate, new job creation needs to be at around 300,000 a month going forward, which is a long way from where the economy is right now (Fig. 3).
Worse Before Better
Furthermore, since the long-term unemployment benefits have been renewed, they could bring more people back into the labor force leading to a rise in the unemployment rate. So, things may get worse before they get better, and that Federal Reserve Chairman Bernanke is probably right when he said it could take “four to five years” before the unemployment rate is back to a more normal 5% or 6%.
Housing & Auto - Key To Jobs
On the other hand, the economy could get there a lot faster beating Bernanke's estimate if both housing and auto sectors could really fire on all cylinders, and if the Administration would really start pushing for more jobs-friendly policies and measures, as the presidential re-election is due in 2012.
QE3 - A Matter of When
Moreover, I think with this latest employment report, it looks like QE3 could be just a question of when, and there’s no way Fed would cut QE2 early as some speculated.
That, of course, will evolve into a total beast by itself later on. But we could always remain hopeful that the U.S. labor market and economy would be strong enough to tackle that equally, if not more, daunting challenge.
Dian L. Chu, Jan. 8, 2011 | Vote for Me - Shorty Finance Award | Facebook Page | New Article Alert | Google Profile
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QE indefinitely is more like it. It would take irrational exuberance at 2000 levels in order to keep the market from crashing after a "QE is now over" announcement from the Bernank. That's years away.
QE has nothing to do with creating employment. It has, however, all to do with financing US government debt.
http://viewfromthewilds.blogspot.com/2011/01/to-qe-or-not-to-qe-that-is-question.html
What's worse that the charts shown up there? ^^^
http://research.stlouisfed.org/fred2/series/USGOOD
We are back to the same amount of good producing jobs as in the 50's, and with almost double the population.
http://research.stlouisfed.org/fred2/series/POP
There is only so much longer we can go buying and selling foreign made products to ourselves before this all falls apart.
Think of it this way:
Why would I go out and bust my ass "for the man" when "the man" has bent me, my children, and my grandchildren over?
Really now, why?
What duty do I have to GM or Goldman Sacks or Citibank or the FED or the Treasury or the CONgress or any of the other assortment of selfish assholes that make up the retinue of those who FUCK the rest of the nation?
None.
Give me unemployment and let me float from emergency room to emergency room and food bank to food bank like the illegals and system milkers who obviously have figured out the game long before the responsible patriotic American did.
Amen brother!
QE3 will INCLUDE muni bonds... even though Ben Shalom Bukkake told congress this past week the Fed has no plans to help with with muni bonds. Of course the Fed lies to congress, we ZH'ers already know that time and time again.
And QE4 will include the purchases of California and Illinois!
Doing the same thing over and over again expecting different results...
The latest recovery is a natural recoil, deadbounce from the lows of 2009.
And unfortunately for government debt, the rebound is associated with FED QE policies which have essentially recapitalized the banks only- not moved money into the credit system.
Why would the banks loan high risk when they can get free mo ey from the POMO system, or the FED deposit system. Its nonsense. The banks can stick the cash in the FED, get a small return as oppsed to almost losing it all all over again loaning to the construction market.
The construction market will be dead for a decade or more- we are overbuilt and overbuilt in areas which should never have been discussed. Deserts, Agricultural areas, live work loft space. No way, no how its coming back for years
Damn that economic model that requires infinite growth on a finite planet with finite resources and a very REAL cost for creating anything (including capital).
QE to infinity and beyond!!!!
Never mind what happens when things are scaled up to multiple planets.
A pet theory of mine is that humanity will not get anywhere near colonizing other planets until we have two things: 1) massive surplus of capital, and 2) an economic need to go there.
Was suggesting that the QE(infinity) idea would simply take hold with multiple planets.
The idea of multiple planets has its own economic consequences, present situation notwithstanding. Not only are you pitting nations against each other, but that you are also pitting entire planets against each other. Even if you were to consider them extensions of another country on Earth, it would still be the same economics.
As long as this has been going, the uncertainty excuse has lost a lot of steam. At about 2-3 years, it could be priced in. Now it's just political refusals to hire.
While a very personal QE3 would be nice, I'd rather take productive work. The personal QE3 would run out, be inflated out, or would make me a target.
Any evidence for this silly opinion?
All the knowledge that currently exists about the whole economic situation. It can be priced in.
At this point, uncertainty is just an overused excuse given such knowledge.
Can someone QE whatever no. me personally? As well as everyone else?
You want to benefit? Get a public sector (preferably union) job, or join the growing ranks of the disabled/discouraged/"where-be-ma-check?" crowd. We now have 25% of the population supporting the rest, and the ratio isn't getting any better. Working hard in the USA is a fool's errand.
It doesn't help that the private sector has every ability to solve that problem, but just marks the longer-term folks as damaged goods. Then that same private sector complains when these people sign up for those benefits.
You're confused. The primary impediment to hiring right now is a mismatch in, or lack of, worker skills. There are plenty of job openings out there, and plenty of opportunities, for workers with the right skills. Consider that the unemployment rate for those with a college degree is below 5%. (Yes, I know, many of these are "under-employed", but the fact is clear: more skills equal more employment opportunities). There are millions of Americans who in the past made a very good living doing what amounted to unskilled or semi-skilled labor. That's all done now. It's never coming back. Forget about it. Anyone who wants to make a decent living in private-sector America needs to recognize this, and then find the skills that employers are looking for and acquire them. Alternatives, of course, include government employment, the perpetual dole, and crime.
Skills mismatch? That's just an excuse to not hire - if there really was no problem, the mismatch would be trained out. The private sector needs to stop asking for more and simply putting up with what our nation has.
Either the private sector can do something productive with those people, or keep on paying tax dollars to those people as a price for saying no.
Junked you for suggesting that.
QE=more stealth bank bailouts
There simply are a whole lot of people put out of work due to jobs being sent to China and Mexico who will never work again....QE3 won't help, but it might get Obama re-elected if the stock market doesn't dive.
Damn mexicans, they are worse than the swiss.
"Damn mexicans, they are worse than the swiss."
...These two Swiss Maidens don't speak a word of Spanish, but they sure can Yodel.
Two renditions of Ku Ku Yodel.
...and check out Vancouver BC's Superhero of Positivity...Spandy Andy
http://goodthoughtsgoodwordsgooddeeds.blogspot.com/
There is no way you can justify another QE program when clearly none of this is creating employment.
Red Alert (really):
China's December trade surplus came in at 13 billion versus an expected 20 billion.
You want more proof that American Consumers are seriously sucking wind, and just plain tapped out, and in the biggest consumer spending month, no less?
Americans can't even afford to buy as much cheaply made, cheaply priced, Chinese shit anymore. WTFISWTH?
Oh, that's right: Unemployment is (real rate) near 17% and combined with underemployment is (real rate) about 25%, with real wages falling and benefits being eliminated.
Yep. That'll do it.
Can't wait for the massive headlines from the MSM & CNBsC on this /sarcasm.
I have to assume you are being facetious, because QE has nothing to do with employment.
It does, however, have everything to do with re-flating the banks balance sheets, and subsequently trying to push all parties out of bonds to spur velocity. That's the master plan as i see it.
Assuming that happens, and is successful, you might even see some jobs created, allbeit very slowly. Personally, i think we will be heading for the next trough (recession) well before we see -5% (full employment).
The 16% U-6 or 20%+ shadow stat unemployed are not even a blip on the radar for the powers that be.
QE has everything to do with employment. It destroys jobs. It diminishes the pool of real savings by debasing the currency. It distorts the price system, needed for entrepreneurs to invest. It transfers wealth from savers to the institutions who first got their hands on the newly printed money.
"QE has everything to do with employment. It destroys jobs."
What jobs have been destroyed by QE, explain please? Because we had these unemployment levels long before the past couple rounds of easing, those jobs were gone long ago, circa 2007-2008-early 09. If you are referring to ZIRP prior and to this day, then yes i agree.
"It diminishes the pool of real savings by debasing the currency."
I don't dispute savers (retirees) are being punished by monetary policy. However, what exactly has been debased thus far - we have little-to-no velocity. (We are left to believe Uncle Ben can throttle/feather the peddle on, interest on reserves. Only time will tell).
"It transfers wealth from savers to the institutions who first got their hands on the newly printed money."
I said as much, if you read between the lines, when i said we are reflating the banks. However, what does main street savings have to do "directly" with employment levels? (consumer confidence not with standing). Because, by and large those unemployed, were and are of lesser education, and they had little-to-no savings to begin with.
These were the spenders of days gone by..... *enter the reason why there is no demand here*. Savers are also not saving, they are de-levering. And, I don't think the larger proportion of unemployed, that has little-to-no savings, cares much about rates at the moment.
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As an aside, I am confounded when MSM, and blog-o-sphere, are saying the rise in yields proves QE doesn't work. No, it is doing exactly what was intended, that being, push everyone out of cash and bonds, and into (theoretically) domestic equities. Also, (theoretically) pushing businesses to up their capex spending. Now, whether these shifts are actually happening another story. How about we exchange capex for M&A and domestic equities for Emerging markets.
All paper currencies have been debased. Look at gold, silver, wheat, oil, cotton. Every where you look, there's inflation.
About savings...
Savings in general are necessary for investment. Savings equals investment (Mises). Investments are needed to grow the economy, because it enables companies to grow production and jobs are being created. A job not being created by the free market is a job destroyed, because it's less productive (USSR was fully employed). Consumer confidence doesn't tell a thing. In a depression, confidence is low, because of the unwinding of malinvestments in the preceding (inflationary) boom. The depression is the cure, inflating everything to make people feel richer and more confident was the problem in the first place. It's setting the stage for a larger bust down the road, because they are trying to reinflate the previous bubbles. Too much housing, too much banking, too much lawyers, too much service sector jobs and too much government.
What is needed to recover, is that those resources are released and they should go to production. But the last time I checked, manufactering jobs were being lost.
It is not so much as jobs being destroyed by QE as job creation being suppressed due to small businesses being burdened by the increased commodity costs due to QE induced inflation. Most small businesses don't have access to Bernanke's dollars but still have to cover the increased costs of the commodities needed to run the business. Therefore a choice may need to be made between raw materials and hiring a new employee. And if the raw materials are necessary to running the business then the new job opening will have to go.