Some of the jobs that have disappeared through this recession are gone forever, it seems. Even when the market turns, and even gains momentum, we could be stuck with a fairly weak employment market for a while. The recovery will take longer than we'd like, putting more distance between now and the top of the next market run. We've lost 7.2 million jobs since December 2007, and the predictions of some economists that we'll get them back by 2014 may actually seem optimistic.
Why is the recovery going to be such a grind? Check out the four major reasons after the jump.
1. Auto and construction won't help
In the past, the auto and construction industries helped extract the U.S. economy from the jaws of recession. This time around, that seems unlikely. Detroit is in disarray, and the real estate sector is still a mess. There are plenty of new homes on the market, and more than a handful are in foreclosure. The number of mortgages underwater by 2011 could reach 50%.
2. Jobs and spending, spending and jobs
Consumer spending is the ticket out of a recession, but consumers won't shell out their cash unless they have steady paychecks on which to rely. Jobs are created by economic growth, which comes from consumers who go out and spend. Obviously, unemployment is the barrier. We're stuck in a vicious cycle; it's going to take something dramatic to break it.
3. Business loans aren't coming
Smaller and medium-sized businesses are having trouble getting banks to play ball. Without bank loans, they'll have trouble expanding ... which puts the brakes on job creation. Until the banks start lending a bit more (which is a lot to ask, given that easy credit got us into this mess), there won't be many new jobs coming to market.
4. Rich and poor have seen wells run dry
Homes with higher incomes aren't spending like they once did, thanks to the losses they've taken on the values of their homes and the beating their portfolios have endured. At the other end of the financial spectrum, credit's harder to come by, which is constraining consumer spending.
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Reader Comments (Page 1 of 1)
10-20-2009 @ 10:29PM
Peter Van Schaik said...
Not only do consumers want to see the employment situation improve so they can be assured of job security, they also want to see some real deals on price. Prices have been lowered frequently enough by enough retail establishments to establish a trend. Want to entice the consumer to buy? Make them an offer they can't refuse! http;//jpetervanschaik.googlepages.com
10-21-2009 @ 5:20AM
al coholic said...
In my opinion #4 is the biggest reason it will take so much time to dig our way out of this mess. It will take a number of years for all the equity loan balances that financed all that consumer spending to go away. Many, who bought cars or other big ticket items with equity loans will never allow themselves to get that carried away again, which doesn't bode well for consumer spending in the near future either.