What Recovery?

September 29, 2014

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According to Fed Chairwoman Janet Yellen, “More jobs have now been created in the recovery than were lost in the downturn… the unemployment rate, at 6.2% in July, has declined nearly 4 percentage points from its late 2009 peak.” (Source: “Labor Market Dynamics and Monetary Policy,” Federal Reserve, August 22, 2014.)

Great news, right? On the surface, yes. But when you look closer at the numbers, the jobs market paints a very different picture as to what is going on in this country.

Prior to the Great Recession, in January of 2007, there were 4.24 million Americans who were working part-time because they couldn’t find full-time work. In July of this year, the number of Americans working part-time (because they couldn’t find full-time work) was 76% higher at 7.51 million. (Source: Federal Reserve Bank of St. Louis web site, last accessed August 25, 2014.)

The boom in the jobs market has been in part-time work! How do you feed a family with part-time employment?

But the jobs market misery doesn’t end there…

In January of 2007, the average duration of unemployment in the U.S. economy was 16.3 weeks. In July of 2014, this number stood at 32.4 weeks. Once unemployed today, people are taking over seven months to find another job—double the time it took to find a job before the Great Recession. (Source: Ibid.)

And let’s not forget that the “official” government unemployment numbers exclude those people who have given up looking for work. If we look at the jobs market and include those people who have given up looking for work and those who have part-time jobs because they can’t find full-time jobs, the real rate of unemployment (referred to as the underemployment rate) is still over 12%! And it’s been over 12% for years now.

Dear reader, as far as I can tell, the biggest boom area in the U.S. economy is in part-time jobs.

Adding to the problems of the U.S. jobs market, to keep profits rising because revenues are stagnant, big American companies are taking an axe to their payrolls.

Not too long ago, we heard software giant Microsoft Corporation (NASDAQ/MSFT) was laying-off 18,000 employees. Cisco Systems, Inc. (NASDAQ/CSCO) recently announced it will reduce its workforce by eight percent—6,000 employees. A year ago, it cut its workforce by five percent—4,000 employees. (Source: Wall Street Journal, August 13, 2014.)

Is the jobs market a mirage just like the stock market? Well, you can say the jobs market data points to the idea of growth in the U.S. economy as a far-fetched idea. As for the stock market, with it rising closer to new highs (again) on drastically low trading volume, that’s not real either.

Note from dshort: For some statisical context on part-time employment, here are two commentaries that I update on the Monday after the latest employment report is released.