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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 3, 2009 at 10:15 AM

Why the unemployment epidemic will get in the way of a rally

Top of the News: The March unemployment report should add to suspicions that we’re in a sucker’s rally on Wall Street. Unemployment is a trailing indicator — thus, the economy could find bottom and begin a, realistically, tepid recovery before the jobless numbers show it. But the 663,000 jobs lost in March, raising the national unemployment rate to 8.5 percent, are part of a much deeper dynamic that will make real corporate earnings improvements, and real stock price increases, difficult to sustain.

Add in the broader numbers of people working part-time when they want fulltime work and those who have given up actively looking and the rate rises to a borderline depression 15.6 percent. Former Labor Secretary Robert Reich today pointed out how all those lost jobs have a multiplier effect on the broader economy. “This is still not the Great Depression of the 1930s, but it is a Depression.” He, along with UC Berkeley economist Brad DeLong and others say the Obama stimulus is far too small to offset the production the economy is losing.

Yet the human capital cost of the downturn goes even deeper. A record one in 10 Americans now depend on food stamps. Retirement accounts have lost between $2 trillion to $4 trillion — deferring retirement for millions and, again, rippling out into the economy, including to sectors that had become flush for decades thanks to the rising living standards and disposable income of American retirees. Meanwhile, foreclosures keep rising and house values keep falling — showing continued weakness in the biggest asset that average Americans possess. This was especially true through the past eight years as wages stagnated and most Americans depended on rising house values for their increased net worth. And millions of working Americans are strapped with high credit-card debt, which could be the next shoe to fall in the financial sector.

After such a long, hard ride, it’s natural to be looking for the bottom, to be waiting for the sun to break through. We’re not there yet.

Today’s Econ Haiku:

Timmy’s in the well

Lassie knows those Wall Street ties

Quick, go get help, girl

Comments | More in Jobs/Unemployment, Retirement, Stock market, Working America

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