Unemployment Numbers Not Likely to Recover Any Time Soon

JoblessIn a recent New York Daily News article, columnist Nouriel Roubini explains that the unemployment rate will likely peak close to where it is now, but the worst is yet to come.  There may not be a full recovery until 2011, and millions more could lose their jobs in the months and years to come.  The article goes on to explain that in October alone, the US lost over 200,000 jobs.  Many of these jobs are unrecoverable, as they have been outsourced to other countries never to be seen stateside again.

Roubini’s article brings up some very unsettling facts.  The unofficial unemployment rate of over 17.5% is one of them, but if you read between the lines, the numbers are actually much more telling than just a face value assessment alone can provide.  The US labor market has unofficially lost over 10 million jobs since the start of the recession.  Losing 200,000 jobs per month from a pool of over 100 million is not as bad as losing 200,000 jobs per month from a shrinking pool of only 90 million jobs, but as the pool continues to shrink, and the job losses continue to be consistent, larger and larger portions of that pool are lost.  Just keeping losses still at the 200,000 per month mark is not enough, given that these losses are coming from a smaller and smaller job pool.  If the recession was truly over, as many economists suggest, then the number of job losses per month would at least slow by the same factor as the number of lost jobs total.  But we don’t see this in the numbers.

Another scary fact is the way employers have cut back hours and pay to help cushion the economic blow that has come to the labor market.  This has had the effect, according to the article, of cutting 3 million jobs out of the labor pool alone.  One a company decides that it can “do more with less” and operates with that mentality, it’s very tough to convince anyone to rehire more workers once a recovery does occur.  Take the airlines for example.  They have cut back wages, services, and luxuries to the point where flights barely resemble the pre-911 likeness.  Most airlines also began charging robust fees for non carry-on baggage during the fuel price spike of 2007 and 2008.  All of these changes to help the bottom line were justified by exterior forces yet none of these changes have been reversed.  The airlines have learned that they can operate at higher levels with less staff, service, and amenities all the while charging baggage fees even after the fuel prices have come down nearly 40% since their 2008 highs.

The same will be true of American employers in a post-recession world.  They have learned how to cut the fat and will likely not got back to their more economically-obese, high overhead selves any time soon.  As the article suggests, it is time to hunker down, but I think that’s a serious understatement as the facts present a situation much worse than many are willing to accept.