Just so we are clear on something on unemployment

[AllentownJake]

Unemployment is not a lagging indicator in a consumer economy. Unemployment is a leading indicator. If 70% of your economy is dependent on service and not manufacturing than the less consumers you have, the less consumption that is taking place leading to higher unemployment.

How the hell in an economy where 70% of the work force is based on service can unemployment be a lagging indicator. Less jobs = less consumption = less less jobs, till you reach a point of minimum consumption.

Please stop trying to use economic models for an economy that no longer exists. If this was 1960, I'd agree employment is a lagging indicator. The US economy is not what it was in 1960.

[Statistical]

1. Unemployment HAS ALWAYS been a lagging indicator.

Every single recession since we started keeping track unemployment peaked 9-18 months after GDP went positive.

Think about it. Why does a company hire someone? Because they want to be charitable? Because they want to be bigger just for the fun of it? No. A company hires someone because they have NO CHOICE. They hire someone because if they don't they will lose a sale. They hire someone because it is more expensive (in terms of lost revenue) to NOT hire someone.

Usually companies will raise overtime before hiring a new person. Hours worked will go up before unemployment goes down. Hours worked will likely peak in 3-6 months and unemployment will begin to decline in 9-12 months.

My SWAG is Q2-2010 unemployment peaks somewhere around 10%-10.5%.

[AllentownJake]

7. The past recessions have been symptom of a larger structural problem in the United States

That has been covered over by the Federal Reserve. The solution for the past 30 years instead of taking the hit and rebuilding has been to inject cheap money and allow the federal government to run massive deficits to spur demand.

As such each recession has gotten progressively worse and jobs have been shipped over seas till we have gotten to an imbalance where 70% of our economy is based on not making anything.

Here is the deal, when they are closing a factory in the United States, they aren't reopening the factory in the United States they are opening it overseas.

There will be no recovery.

Where are these new jobs going to come from?

[izquierdista]

10. Jobs? Who needs jobs?

We're all supposed to be the idle rich and let the peasants in China do the dirty factory work.

[Statistical]

15. That doesn't change the fact that JOBS ARE STILL LAGGING INDICATOR

Begin End Length U Peak U Peak Months after End
Apr-60 Jan-61 11 7.10% May-61 4
Nov-73 Mar-75 16 9.00% May-75 2
Jan-80 Jul-80 6 7.80% Jul-80 0
Jul-81 Nov-82 16 10.80% Nov-83 12
Jul-90 Mar-91 8 7.80% Jun-92 15
Mar-01 Nov-01 8 6.30% Jun-03 19
Dec-07 Sep-09 22 10.50% ??? ???

From a "technical standpoint" (GDP turned positive) at some point in Q3. I will use Sep-09 as an estimate so that puts the recession at 22 months.

In every single recession unemployment did not peak until AFTER GDP turned positive. The average length of time for all recessions in last 80 years is 9.8 months.

Using 9-18 month rule we can expect unemployment to peak around Apr-2010 to February-2011. The recovery may actually have begun a few months earlier so I doubt we will see Feb-2011. Given the economy could have recovered as early as July-09 that would put 18 months at Dec-2010. Unemployment will most likely peak between Apr & Dec 2010. While some recession the recovery period is shorter the length and severity of the recession tends to correlate with length of time till U peak. Given this is a much longer (22 months) and steeper (-4% GDP) recession it is unlikely we will see jobs earlier than 9 months.


Your point about jobs "not coming back" is a strawman and does support your "leading indicator theory". If jobs don't come back then the recovery will fail ("W" shaped). However that doesn't change the fact that even if you changed policies to ensure jobs come back at some point in the future ....... the jobs STILL won't come back until after GDP turned positive.

If you want to write an OP on how/why jobs will never come back I won't disagree with you however your belief that in "consumer based" economy jobs are a leading indicator is just that your opinion. One that isn't back by any historical record, economic theory, or even sound logic.


* Note jobs did come back in Jul-80 however we were right back in a recession in Jul-81 (the shortest period of growth between recessions in last 100 years). Many economist consider the Jul-80 to Nov-82 to be one large W shaped recession.

[girl gone mad]

17. Not exactly.

http://1.bp.blogspot.com/_98LrsshmC68/Sk-y8-DYarI/AAAAAAAABBY/V82OMDTzwbE/s400/Unemployment+figures+During+Recessions.png

Notice the trend? Recovery in employment has gotten flatter with each of the last 3 recessions.

[AllentownJake]

20. Because manufacturing in each recession

has recovered less and less

[Statistical]

21. Agreed. There is no guarantee that jobs will come back at all.

However they won't come back BEFORE GDP turns positive and that is the definition of a lagging indicator.

Also the 3 most recent recessions prior to this one were mild with an average unemployment.

Average u peak: 8.3%
Average length of recession: 10 months
Average GDP % drop: -1.96%

This recession
U peak: likely 10% to 10.5%
Length: likely 22 months
GDP drop: -3.96%

So considering length is double, unemployment peak is likely 20% higher, and GDP loss is doubled the likelihood that jobs will come back first or even "early" is virtually nil.

Edited: fixed leading type to lagging.

[AllentownJake]

22. GDP will not turn positive

Without the Government fudging the numbers or inflating the currency to create a false return to GDP increase.

[Statistical]

25. Is that worldwide.

Unemployment hasn't peaked in France, Germany, Japan, or Korea.... they are still losing jobs but all 4 of those countries went GDP + in Q2. We will at some date in Q3. It likely take a year before we know the exact date but GDP did turn positive in Q3. Housing prices have risen for 3 straight months, industrial utilization has risen for 5 months. Qtrly revenue for Q3-09 vs Q3-08 looks good. Most companies will show a gain in Q4-09 compared to Q4-08.

So now your argument has become that since you fail to believe the jobs are a lagging indicator the entire world is faking the numbers to make it look like GDP is growing without jobs growing? Sad.

[AllentownJake]

27. LOL

The world is literally financially falling apart and you are believing the propagandist lies.

[Statistical]

29. We will see in 12 months.

You aren't the first to predict the end of the world and you won't be the last.

Bookmarked for future reference.

So hypothetically if GDP did turn positive in Q3-2009 and unemployment peaks in Q2-2010 will you still be insisting it is a bunch of propaganda next year? Year after that? Year after that?

[AllentownJake]

30. I'm not predicting the end of the world

I'm pretty sure mankind will survive without corporate finance

:rofl:

[demwing]

28. Don't you have that backward, or did I read you backwards?

If the unemployment rate follows the economy, it is a lagging indicator. If it does not fall till the economy falls, it is a lagging indicator. If it does not rebound till the economy rebounds, it is a lagging indicator. Your comment "they won't come back BEFORE GDP turns positive" means the unemployment rate lags behind the GDP, and as such, it is a lagging indicator.

What did I miss?

[Statistical]

32. That is exactly the point it is a lagging indicator.

Recession began in Dec-2007 but job losses didn't peak until Feb-2009.
Recession likely ended in Q3-2009 but unemployment won't peak until Q3 (or Q4) 2010.
Unemployment is always a lagging indicator (except in the OP world because this is a "special recession").

Unmployemnt has NEVER in any recession in any country recovered before GDP. Never has, never will.

The economy is simply too large compared to the size of any potential govt stimulus or jobs program for govt to prop up the entire economy. At best the govt can shorten the recession, reduce the peak unemployment, and strengthen the recovery.

US GDP has fallen 4%. Our economy is $14T so that is an annual loss of $560 B. However recession has gone on for 2 years so that is a loss of $1.12T. For the US govt to completely prop up the economy it would have required a stimulus of $1.12T and 100% effective use and every single penny spent by now.

Instead we had a stimulus of $780B and we spent about half of it = $390B. A lot of it wasn't really stimulus so likely we had a stimulating effect of somewhere around $200B to $250B. Which is roughly 20% to 25% of what the US economy shrank.

[demwing]

44. OK, we agree

this line throws me: "However they won't come back BEFORE GDP turns positive and that is the definition of a leading indicator." Sounds backwards.

[Statistical]

45. thanks. that was a typo should be lagging. I''ll correct that.

[havocmom]

2. Excellent point

As a poet I know puts it: we all be slaves and serfs now, working for the massers and the lords

[Barack_America]

3. The bullshit myth of "Trickle down economics" that simply will not die.

That's how.

It's a cancer.

The rich are getting theirs back in the stock market, so that's got to mean jobs for the rest of us, right? You know, like how it's worked for the past 30 years?

:eyes:

[HughBeaumont]

5. The last 10 years ALONE put "Trickle On" exactly where it belongs.

http://journals.democraticunderground.com/HughBeaumont/94

[Barack_America]

8. Very interesting stats.

Depressing, but interesting.

Thanks.

[AllentownJake]

9. The Rich are about to take a hit as well albeit after the poor take the hit

They are too fucking greedy to realize it.

When there is no one to sell their shit to, what do you think the value of their companies will be?

[HughBeaumont]

12. They won't care. They got theirs. Sad for us. Too bad so sad.

They have a field of pillows to land on. We have a steep hole with a pick axe and it's starting to rain.

[Barack_America]

13. Oh, but they've diversified long ago.

The rich that aren't just servicing the other rich in our country took their businesses elsewhere.

They're more interested in the emerging middle classes in China, India, etc. and their consumption power than ours. The locusts must have realized this field was just about razed a while ago.

But to those rich who merely service the mega-rich...welcome to the jungle, baby.

[AllentownJake]

47. What makes them think that

India and China are going to honor their investments when the United States collapses into a big steaping pile of debt.

:rofl:

[Joanne98]

4. TRUE! It's another jobless recovery. The stock market is a scam!

[Uben]

6. Well, employment sure is lagging.....

The second half of the stimulus will prop us up for another few months, but after that, we will either need a new stimulus plan or just try to weather the storm. I expect the DOW Jones to drop 1000 points around March + or - a month. I have sold off all my stocks in anticipation of this. This is the first time I have ever been in the position of hoping the market drops. I hope to make some money on the rebound. I just can't sit around and do nothing this time around. I'm still down some 40% from last years highs, and being retired, it hurts. Doing nothing is no longer an option!

[leveymg]

11. Until this Admin. fires the ranking economists who crashed and burned 09/08, this will continue.

Their models all failed because they're based in myth, deceit and mass delusion. Even Greenspan admitted it, safely after he got out of the game.

U.S. unemployment is generally taken by the conventional economists to be a good thing, insuring that labor, production and operating costs remain depressed, which raises profit margins and stock prices. The problem is, the developing Asian economies in which the multinationals invested trillions of dollars are also having serious problems with consumer demand. All the ships are going down together.

Of course, you're right. Nothing's going to change until the people at the top get replaced. That won't happen until they've spent every last public dollar that can be borrowed trying to bail-out the existing wreckage.

[TexasObserver]

14. Employment is NOT a leading indicator.

Employment is NOT a leading indicator. It's the last thing to return. Why? Because as the economy contracts, employers let people go, cutting back to limit costs when the consumers are not there. As the consumers return to the market place, employers slowly begin rehiring employees.

Right now, we have more people saving and fewer people spending, because of limitations on credit to consumers and decisions by consumers to wait on purchases. As they become more confident in the economy, they spend more.

The good news in the stock market and in the real estate markets helps consumer confidence increase, and helps those areas begin a recovery.

The jobs come back last.

If you have a model that shows it as a leading indicator, then let us see it.

[Barack_America]

16. It depends on how you define "recovery", doesn't it?

i.e. TRUE recovery?

[TexasObserver]

18. No, it doesn't.

We don't start changing the definitions simply because there are people who are newbies to the recession process. Those who want to maintain it's very different this time simply do not know what it was like the LAST time, or the time before that.

If you want to imagine that a recovery is somehow different now that we have Ipods and facebook, you are free to do so, but that doesn't alter the fundamental mechanics of a recovery. The problem is that many on our side of the argument simply don't know the first thing about economics and will believe any simple minded bullshit someone tells them.

[Barack_America]

31. You may call it a recovery. Because it's only a "recovery" for me.

I'll take those quotes off once we get some positive job growth in this country.

As I pointed out in another post, my family's situation only continues to worsen.

So good for the monied class that they are once again getting theirs, as usual it don't mean shit to me.

[AllentownJake]

33. After they are done ripping us off

They will turn on each other, the parasite is killing the host.

[TexasObserver]

34. Gee, you're the first person to ever say that.

Guess what? In every downturn, everyone says there's no recovery until it hits them, and they're all wrong. If you want to think that "recovery" is what happens to you personally, knock yourself out.

Do you think the sun only comes up on days you see it?

[Barack_America]

37. I think this country is only healthy when its middle class is thriving.

That's what I believe.

I do not for a moment think that my family's story is unique. And that's the problem.

[Statistical]

35. The recover is what leads to jobs....

No recovery = no jobs.

So it is in your best interest if all the real economic leading indicators show positive growth because the jobs your family and millions of families desperately need don't appear by magic and they will NOT start showing up in numbers to replace job losses until about 9-18 months after the recovery begins = GDP turns positive.

[Barack_America]

38. No jobs = no recovery.

Growth in leading economic indicators = great!

But don't call it a "recovery" until jobs come back.

1. Any recovery could be only tentative until that point
2. It's insulting to the people who actually drive this country's economy...the workers.

[AllentownJake]

41. I thought it was the bankers that drive the economy

Most of our wealth exists in one place on paper.


:rofl:

[Barack_America]

42. Shit fool, they don't even drive themselves!

They hire people to do even that!

:rofl:

[AllentownJake]

43. Honestly

they are even existing in a fallacy.

The only thing that protects their wealth in other nations is the threat of the US military. They bankrupt the country no army, navy, or marines to go in and take care of the populist leaders in other countries.

Do they really think the Chinese Government is going to protect their interest in China when we are bankrupt

It took the Roman elites 400 years to destroy their empire, ours did it in 30.

:rofl:

[Barack_America]

46. This is exactly why I went into medicine.

Whether the economy thrives or fails, it's a useful skill. I can make a living wage with it or I can barter my services in order to survive. I decided to pursue a PhD for diversification purposes only.

That is what growing up in metro Detroit taught me. Depressing ain't it?

Manifest destiny is dead.

[AllentownJake]

19. In a manufacturing economy fully agree

However when 70% of your economic activity is based on providing services and making nothing than unemployment is a leading indicator. The more people unemployed the more people not buying shit or purchasing services.

There is no model because such an unsustainable system has never existed before. Propping up the house of cards is only delaying the collapse.

[Barack_America]

24. My mother's unemployment just ran out.

And now my husband and I are scrambling to find money to support her.

So that's three people withdrawing from consumption. (and maybe more if she turns to additional family for help)

We're dropping out when our economy is supposedly recovering?

If you want some anecdotal evidence for your point.

[earthside]

23. Ha! Ha! Ha!

As the first poster above alluded to, we are living in a different economic world than the old one where unemployment used to be a lagging indicator.

When so much manufacturing has been outsourced overseas, when three-fourths of the economy is based on consumption of mostly imported goods, and when we are so much now a 'service' and government jobs based economy -- then unemployment is going to be a leading indicator.

No matter whether your 'confidence' is high or not, if you don't have disposable income, there ultimately is not going to be any sustainable 'recovery'. And that is exactly what is going on -- based on the 'model' of commons sense and reason.

It is also becoming increasingly obvious that most of the 'green shoots' we've seen lately are all because of gimmicks from the federal government: car sales slumped again big time last month because 'Cash for Clunkers' ended ... and when the first-time home buyers tax credit ends, all the uptick in home sales will plummet, too.

Finally, if you couple unemployment with the dire reports of state and local governments cutting services and jobs because of plunges in sales tax revenues, it becomes clear that people are not buying more -- no matter what the government statistics try to tell us.

Nothing has changed in this recession except the injection of huge amounts of federal government fiat money -- once that is finished rippling through the economy, we will be still deep in a consumption-killing debt crisis that will go on for a long time to come.

[AllentownJake]

26. Someone who gets it

The solution to the past 3 recessions have been to borrow and print more money and prop the system up.

Some people have bought into that those were recoveries. Saying those were recoveries is like saying that when I lost 20,000 in income and got a 20,000 credit line everything balanced out.

:rofl:

[baldguy]

36. +1 -- A "jobless recovery" is no recovery at all.

[HughBeaumont]

39. And what's the commonality of all failure disaster corporatist economies?

A: They stopped MAKING products and started either GAMBLING (i.e. rotated their economies around finance, debt and speculation) and/or making WAR. Iceland. Most of South America. The U.K. US.

No diversity + no liveable wage = a glut of non-degreed and degreed workers without jobs on the outside looking in.

[AllentownJake]

40. Next phase is political instability

As people begin to realize their government isn't there to protect them and those that are selling things to them are selling them shit.

You can't eat propoganda