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The Department of Labor statistics shows that the long term (1970-2008) annual unemployment is about 6.1%. Not good. 

USEconomicStatistics

Figure 1: Annual Unemployment & Annual GDP Growth. 

 

When Will Unemployment Return To Normal?
Using 6.1% as a bench mark this data show that the unemployment recovery rate after a peak, averages at 0.06%/month. From a May 2009 of 9.4% unemployment, it will take until November 2013 for unemployment to come down to 6.1%. Today’s (10/02/09) news Jobless Report Is Worse Than Expected; Rate Rises to 9.8% or 15.1 million jobless, suggest that it is more likely to be June 2014. Not good. Definitely not good.

 

What Does This Mean?
The US economy is 70% dependent on consumer spending, so we can expect GDP growth to much lower when this recession is over. The recession is expected to be over possibly this quarter 4Q 2009 or next quarter 1Q 2010. Then the “real” economic growth i.e. the job growth (job growth is what really counts) becomes the main driver and indicator of this economy. Without the job growths, mortgages are hampered, and banks, are constrained  and . . .

 

How Can Your Company Help?
1. Don’t downsize your jobs: Downsize your pay & benefits (temporarily) starting from the top.

2. Pay down your debt: This helps banks with their recovery.

3. Don’t ship jobs overseas: This is probably the single most important lesson from history. Jobs follow markets and markets follow jobs. Of course there are some jobs where the domestic-foreign pay diffference is so great that companies have no choice but to out-source overseas.

4. Invest, invest, invest: Good investments lead to better run companies. A good approach to becoming competitive with overseas costs is to invest in technology or capex that substantially increases productivity.

 

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Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.
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2 Trackbacks/Pingbacks

  1. […] QuantumRisk – Management by Design Strategy, Business Reengineering, Financial & Loss/Risk Modeling About « 14.5 million Jobless and Counting […]

  2. […] in my October 2, 2009 post (10 days earlier) 14.5 million Jobless and Counting I stated exactly that, and that the this situation is so bad that Obama Administration should start […]

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