The number "5 million" doesn't seem like much in a world of billions and trillions. But it's a lot when you're talking about the U.S. job market. That's because five million represents the number of jobs the U.S. economy would have to create to achieve what the U.S. Department of Labor calls "full employment."
Full employment is a condition in which every adult who wants a job can secure one: It's characterized by both GDP growth and adequate bargaining power for potential employees.
U.S. unemployment rate: highest since 1983
What's the job market like currently? Well, to borrow a phrase from CNN's immortal Larry King, "We ain't exactly at full employment, right now."
The U.S. economy lost another 651,000 jobs in February, with the nation's unemployment rate soaring to 8.1% from 7.6% in January, the Labor Department said. It's the highest unemployment rate for the U.S. since 1983.
Further, the U.S. economy has now lost more than 4.4 million jobs since the recession started in December 2007 and a staggering 2.4 million in the past four months.
There are now 12.5 million people officially unemployed, the Labor Department said. Most economists don't view the official number of people unemployed as indicative of true joblessness because the statistic does not include those unemployed who have given up looking for work. Add those and the number of unemployment probably is closer to 15 million, and the jobless rate easily exceeds 10%.
In addition, there are now 8.6 million people forced to work part-time because they were unable to find or their employers would not grant them full-time work. Add those part-time workers to the unemployment rate and the percentage of people underemployment/unemployment approaches 15% -- light years away from full employment.
Further, some may view the 5 million job deficit as a minor hurdle, but it is not, economists say. Consider this statistic: the United States economy must create 100,000-125,000 jobs per month, just to keep the unemployment rate from rising. Another stat: at a normal rate of job growth, 200,000 jobs per month -- or at least what labor statisticians viewed as normal before the globalization era -- it would take four years for the U.S. economy to achieve full employment: four years.
That would mean the U.S. would not resume a normal unemployment rate -- between 3.5-4.5% -- until 2013. It would take a shorter time if the U.S. experienced above-trend job growth -- for example 300,000 jobs created per month -- during a robust recovery.
For investors, all this fussing about job growth is definitely not merely an academic exercise. It's almost impossible for corporate revenue and earnings to grow in a sustained way without job growth, as job growth drives a myriad of bull indicators: household formation, consumer spending, consumer confidence, business confidence -- even business decisions to undertake expansions and/or launch new projects.
In addition to robbing the nation of GDP output (and corporate revenue and earnings), unemployment, as most investors know, exacts a tremendous human toll, and leads to increases in both state and federal social services costs, due to increased unemployment insurance claims, home foreclosure-related costs, and Medicaid expenses, among others.
Unemployment also does not occur in a vacuum. Of course, one can never predict with 100% certainty the winds of political sentiment, but history has demonstrated that in the modern era, sustained, high unemployment rates have almost always led to political power gains for the Democratic Party, followed shortly thereafter by economic and social reform. The periods of greatest economic and social change in the United States have occurred during high unemployment periods.
Essentially, the American people, casting aside the drawbacks of the American economic system -- corporate capitalism -- remain very supportive of it, until unemployment starts to rise. At that point, the American people begin to question their sacrifices for and investment in the system, if they're not experiencing a vital benefit, namely: jobs.
It's at that point that the American people say, 'Fix the system,' or 'Correct the problem,' which propels both economic and social reform: the system adjusts, and then GDP growth and job growth resume their merry path. At least, that's been the historical pattern: here's hoping for a repeat.
Economic Analysis: Indeed, full employment is a long way away. Further, along with fiscal stimulus, an essential required to achieve full employment concerns fixing the banking system to get credit -- the lifeblood of the economy -- flowing more freely. Credit is essential because it enables businesses to expand, which leads to increased hiring.
Also, investors, should not underestimate the impact of rising unemployment on the current economic system. Historically, rising unemployment has placed the greatest pressure on capitalism -- both in the United States and abroad. Hence, it's in stakeholders interests to reform the system and support programs that strengthen it, such as fiscal stimulus and other programs that stimulate demand and create jobs.
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Reader Comments (Page 1 of 1)
3-09-2009 @ 1:47PM
zhw613 said...
Hi Joseph,
I enjoyed the way you focused on a number and framed it in terms of the broader political economy. You may be interested to see a few state-by-state maps depicting related numbers:
http://www.uuorld.com/blog/?p=937
In earlier posts you'll also find some efforts made at connecting politics with economics. For example:
http://www.uuorld.com/blog/?p=748
We're always looking for new stories and great data to support with great amps, so please contact us if we can ever be of assistance with your work.
Best regards,
Zach
https://www.uuorld.com
3-10-2009 @ 9:59PM
Daniel said...
You provide good numbers, but I think the future of the job market will not be as easily reduced to numbers as the current one is.
According to newsy.com, there's "...another group standing to benefit—freelancers." And freelancers from my experience tend to have a better handle on how to exploit legal loopholes to maximize profit than standard employees. Which means the numbers could cease to accurately reflect the economic reality.
3-12-2009 @ 4:35PM
Kenny Hatcher said...
Obama's ideas like the whole stimulus bill that was pushed through, and all of this new spending is ridicules. It does nothing to create long term jobs. These are all short term projects that they want to do. What are all of these people working on these projects going to do once everything is fixed? They will be jobless without any where to turn and the economy will go back down. If we are going to throw money around, lets throw some into creating jobs outside of the government. One job resource that could use a jolt of life is our manufacturing industry. I was reading articles over at americanboom.com about how much of this problem could have been avoided if we had not outsourced all of our manufacturing to China. We need to stop relying on the government to bail us out and start bailing each other out. If we support companies that employ Americans then maybe they will not move to China.
4-09-2009 @ 3:16PM
Gerald Spencer said...
The only thing that will create, save, preserve or restore US jobs is reversing the trade deficit by re-building our industrial manufacturing economy to manufacture the things that we import, and we must accomplish this by any means possible, or accept third world poverty on a large-scale basis. The only way that we can accomplish exporting US made products is to re-industrialize and make these products with US materials & Labor. The only way that our products will be sold abroad is if these products are either technologically superior, or cheaper. We somehow need to reverse the flow of title to US property, US gold, US securities, and US currency to foreigners in other lands in payment for the things that we consume.
What is preventing the USA from re-industrializing? The US citizens do not want to work for the extremely low wages that are paid in foreign countries to manufacture the things that we consume. This is the main reason why the US manufacturers have closed their US factories. As an example, the US tire manufacturing companies closed their plants, sold the tire manufacturing equipment to Foreign Citizens who relocated this equipment to their foreign countries where labor costs are very low compared to US labor costs. These foreigners re-constructed and re-started these plants using workers that are paid only a fraction of the pay that US citizens would accept. As a result, these foreign companies now manufacture most of the tires consumed in the USA. The foreign countries do not buy very much if anything from the USA because our products are much more expensive than foreign made products.
If we cannot compete on lower labor costs, then we need to be competitive internationally through other areas such as superior technology. We could make our educational system create many more medical doctors, scientists and engineers (rather than graduates other degrees) who must also become much better educated, much more intelligent, and otherwise much more superior to any foreign scientist and/or foreign engineer in order to design, create, innovate, and produce new technical products that foreigners do not have, so that the foreigners will then buy these new products from us, in exchange for their gold and currency. Only if our products are superior can we export these products in return for their foreign payment (gold and US dollars) to the USA.
If we had greatly superior engineers, medical doctors, and scientists we could then export scientific and engineering services to foreign nations in return for their currency and gold in order to improve our balance of trade. These services have to be provided by doctors, scientists and engineers who are much superior to any foreign educated doctors, scientists and engineers, or the foreigners will use their home grown medical, scientific and engineering talent and not buy the services of US doctors, scientists and engineers.
We need to create a demand and provide more financial incentive for our students to major in the medical, technical and scientific subjects that are needed to re-industrialize the USA and improve our economy. We need to return to scientific and technical excellence in our education systems that we essentially destroyed in the past few decades, because we can only export technology if our products and technology services available for export are superior to those available anywhere else in the world, and/or at least superior to the services available in that particular foreign country. According to the National Science Foundation and the National Society of Professional Engineers, only about 5% of the current college students in the USA studying for a degree in science, medicine, mathematics or engineering are US citizens. In the Asia the vast majority of the college students are majoring in science or engineering. We need to increase the percentage of USA citizen college students studying science and engineering from 5% to more than 60%, in order to emulate the economic successes of the Asian countries.