Friday, March 9, 2012

39.3 Million Missing Jobs

Mark Zandi was on CNBC today. He used the word "fantastic" to describe the employment report. I have a somewhat different take on it.

If the exponential employment trend that was established between 1939 and 2000 was still in effect, then there would be 39.3 million more nonfarm payroll jobs right now. This exponential trend has failed and there is no going back to it. It is physically impossible. You can see that in the following chart.

Click to enlarge.

The next chart specifically shows the missing jobs. Note that in 2000 the party ended.

Click to enlarge.

The following chart shows how the employment growth over the last year stacks up to typical employment growth.

Click to enlarge.

We're well below the median. So how bad is it? Well, the median includes periods of recessions. We're not currently in a recession (and haven't been for nearly 3 years). Therefore, if history was all that mattered then we should expect to be doing better than the median. We are not. Here comes some sarcasm. Brace for it.


Note how much we are struggling. You'd think the median value was an impossible task. I think it is possible (perhaps unlikely) that we can reach the line but it really doesn't look to me like we will overshoot it by much. I'm basing this on the steepness of the approach.

I remain extremely bearish on our economy over the long-term. What's going to happen to employment during the next recession? I have no crystal ball to determine the timing. I can say this though. We better not enter the next recession with anywhere near 8.3% unemployment.

Some might argue that by keeping interest rates low, the Fed has made it impossible for this country to ever face another recession. Good luck on that theory! I am not a believer.

Source Data:
St. Louis Fed: All Employees: Total nonfarm


Stagflationary Mark said...

Here's another way to look at it.

Let's sum up the last 11 years (since February 2001).

1. There have been two recessions.
2. A grand total of 168,000 nonfarm payroll jobs have been added.


Stagflationary Mark said...

I offer a few opinions from the other side of the prosperity predicting fence.

Buffett: US recession 'very, very unlikely'

The Omaha billionaire isn't worried that his new purchases will be caught up in a double dip for the U.S. economy. He thinks "it's very, very unlikely we'll go back into a recession."

On the one hand, I should mention that the article was published on September 30, 2011. It therefore isn't all that timely.

On the other hand, Buffett didn't offer a timeline. One can only assume by the way he worded his quote that the economy will never fall back into a recession.

We're 100% recession-free from here on out! Woohoo!

Now pull my finger. I'm feeling lucky, lol. Sigh.

Here's something a bit more timely.

March 5, 2012
Buffett vs. the profiteers of doom

"It's a terrible mistake to get pessimistic on America," Buffett said on CNBC last month. "It has not worked since 1776, and it's not going to work now."

It has certainly worked for me. I started this Illusion of Prosperity blog in 2007. Let's use some hindsight.

FRB: Flow of Funds

Net Worth (2007): $65.2 trillion
Net Worth (2011:Q4): $58.5 trillion

That's $6.7 trillion missing. It's more if you adjust for inflation.

It's even worse if you price it in oil, gold, silver, long-term inflation protected treasuries, and/or long-term I-Bonds. As a "profiteer of doom", I've dabbled in 4 of the 5 and have no complaints.

I started buying I-Bonds in 2000. The first ones have officially doubled in price. Still buying them. I never invested in oil. Oh well. I owned gold and silver from 2004 to 2006. Made 50%. Although I didn't do as well as many other profiteers of doom, I can hardly complain. The long-term inflation protected treasuries have done extremely well on a relative basis too, much to the dismay of Jeremy Siegel.

Call it an opinion, but I very much believe that we have a "profiteer of doom" economy, but you could have probably guessed that based on what I chose to name my blog in 2007. Sigh.

Stagflationary Mark said...

One more excerpt from the profiteers of doom link.

Buffett is having none of that. "In terms of the economy," he said on CNBC, "the luckiest person born in the history of the world is the baby being born in the United States. I mean, in terms of the outlook for their lives, they are going to live better than John D. Rockefeller lived or better than I lived."

He can't really believe that. Since when has Warren Buffett lived on food stamps?

46.5 million Americans today are and the number continues to grow.

Stagflationary Mark said...

Child Poverty in the United States 2009 and 2010: Selected Race Groups and Hispanic Origin

The 2010 ACS child poverty rate (21.6 percent) is the highest since the survey began in 2001.

Gordon said...

If one looks at creature comforts and lifespan, I suspect Buffet is right. We do live better than our parents, in terms of comfort, and diseases that were killers a few decades ago are manageable or curable.

The question is, how long can we coast on our past glory? As Europe discovered over the past 60 years, the decline of a noble civilization can be very pleasant...until it stops. And it can stop very suddenly.

tj and the bear said...

No more recessions? More like permanent depression...

Stagflationary Mark said...


The babies of "squanderville" will no doubt have a rich and rewarding life.

As you say, until it stops. And it can stop very suddenly.

Squanderville versus Thriftville (Warren Buffet), October 2003

At that point, the Squanders are forced to deal with an ugly equation: They must now not only return to working eight hours a day in order to eat -- they have nothing left to trade -- but must also work additional hours to service their debt and pay Thriftville rent on the land so imprudently sold. In effect, Squanderville has been colonized by purchase rather than conquest.

Stagflationary Mark said...

tj and the bear,

No more recessions? More like permanent depression...

We just need to create a euphemism for depression, then all will feel better.

I suggest "hopefully challenged".

No more recessions! We're permanently hopefully challenged!

See? Much better, lol. Sigh.

Jazzbumpa said...

Contra Buffett, I think the luckiest person is - - - - me.

I was born in 1946, grew up during the golden age, got a job where my income grew faster than the median and have retired in comfort, tough certainly not splendor.

I wonder what sort of world my grandchildren will be adults in. that will happen over the next 6 to 17 years. I''d like to be hopeful, so really see no reason to.

Exponential trends always end. Reality is finite.

Looks like the payroll growth number might approach the median as an asymptote.

What a thrill.

Stagflationary Mark said...


I think you are right. Being born in 1964 wasn't so bad either, but mostly because I picked a career that worked well in the 1980s and 1990s. I was also able to take advantage of the investment boom in that era as well.

The rising tide lifted my boat so to speak. Since 2000, it has been sinking boats though.

Buffett says to be fearful when others are greedy and greedy when others are fearful. I opted instead to be greedy while I was working and fearful when I retired (1999). Can't say it was a bad plan in hindsight. Call it luck, skill, or simply common sense.

It wasn't until 2004 that I saw exactly why I should be fearful (excess debt of others). I still am. Rough times are still ahead of us. Got an email recently that property crime is way up in my area. It was only a matter of time. Sigh.