Friday, January 23, 2009

The Bad News

I keep seeing these kinds of headlines:

Dec. job toll: 524,000
Worst year of losses since 1940s puts unemployment rate at 7.2%

That's in bold type. Then, underneath, in tiny letters:

U.S. economy loses more than a half-million jobs in December and 1.5 million in fourth quarter. Jobless rate hits highest level since 1993.

Now that's more accurate. If you were to read the first headline you would think, "Holy crap! Our unemployment is the same as the end of the Great Depression!" If you read the tiny type you get a more accurate picture: there is a recession happening much like what happened in 1993. It still may get worse but that's where we are right now.

Further, the fail to tell you other facts:
- the jobless rate is at 7.2% which is obviously more than 5% but it's been fairly consistently under 5% for a good while. 5% used (back in the 1980s) to be consider the 'realistic absolute low point' for the unemployment rate. It was thought you couldn't go under 5% realistically so if you were close to 5% you were basically at 'full employment' for the population.
- 524,000 jobs is a lot of jobs but we also have a lot more total people working than we did back during the depression or before it. There are just more people working. A population of 100,000,000 working people losing 500,000 jobs is a lot different than a working population of 10,000,000 losing 500,000 jobs (I don't know what the figures were for working people in the 1920s and 1930s but our country has grown quite a lot since then so we obviously have a lot more people working).
- The Great Depression's unemployment rate topped out at around 25%. We're a long way from that. We've just gotten to the point where we were in 1993 which was a fairly minor bump. Even so, if you think about the way they portray the Great Depression it sounded like everyone was out of work. 1 in 4 was out of work. 75% still had jobs. I'm not saying it's good or that it didn't suck but it's just the way it's all spun that gets me.
- Government spending will get us out of this - What they fail to tell you is that 8 years into FDR's presidency he was pretty annoyed that the unemployment rate was the same as what it was when he took office.

There are some things that are good about recessions:
- if the government stays out of the way (which it won't but if it did) then labor prices will eventually get to the point where business people think, "hey, labor is cheap. I'll hire on a couple of extra guys and try to expand." You really can't do this like you used to because of various regulations like minimum wage. With minimum wage in place it makes it tougher to undercut the next guy in selling your product (you).
- It does give government a huge pool of people to pull from to build government work projects (like highways, bridges, military bases) at reasonable prices (again, if they got out of the way of themselves, in that example).

I don't even watch/listen to the news any longer because it's all the same, "Great Depression," crap which, at this point, really has no basis in reality. We're not even close yet. We just got to the moderately sucky times of 1993. We haven't even hit the suck-times of the 1970s yet, and we very well may not - no way to tell, with double-digit inflation and double-digit unemployment.

The biggest thing we have working against us right now is the lack of education in our own people. The current generation has been brought up to respond to any problem with, "There ought to be a law so the government can fix it." It doesn't even occur to them, "What can I do?"

I don't know how you fix that, either.

Still, the point being: We're not in a Great Depression yet - even will all the talk of it. I think it is possible that we could talk ourselves into one, though. Basically make everyone so fearful of spending any money at all that no one can sell anything and the economy, effectively, stops.

Good news, though: People are paying down their debts and putting money into savings. That's just a healthy thing to do.



Anonymous said...


I just stumbled across your blog from a Google alert.

I thoroughly enjoyed your writing. I felt like I was sitting in our family room, listening to a discussion my dh and I would have. Your insights are right on the mark! You get right to the point and make excellent observations.

I'll be back to lurk and read!


Cristina M. said...

Welcome here, I hope you come back to read and post some comments, too!