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Click to enlarge.
Civilian employment peaked at 146,584,000 in November of 2007. It is now 139,627,000. 45 months later it is still 4.75% below the peak.
The following chart shows civilian employment since 1948. I've included an exponential trend line based on the data from 1948 through 1999.
Click to enlarge.
We are 28.1 million jobs below the long-term exponential trend. As horrifying as that it, at least it isn't as bad as the 39.0 million missing jobs seen in payrolls. That would imply that at least some people have found work outside of the payroll system. One wonders how many have become stock market and/or eBay day traders though.
I would bet all that I own that we will never return to the red trend line. That's true even if we could magically put every single unemployed person back to work.
This time it is different. This is not an opinion. It is a fact based on simple math.
Source Data:
St. Louis Fed: Civilian Employment
19 comments:
Keep in mind that the red trend line is/was growing at a 1.80% annual pace.
Unless we really start churning out babies at a time of great uncertainty, even population growth will not be sufficient to get us back on trend.
I know I've said this before, but I can't believe that even the housing bubble didn't put us back on the trend line (didn't even touch it).
Looks like it all came unraveled around the time of 9/11.
A quick comment on Shiller. I really like the guy. He seems genuine. I also spent a few weeks taking the free online Yale course on Financial Markets that he lectures. It was fun. I love the Case-Shiller home price index, and the P/E10 index for stocks. My only beef with him is that he gives way too much credence to his peers who are in no way his intellectual peer. He also adheres to some classical notions that have been proven false. I still like him and listen to him. I started buying I-bonds in 2001.
Now, a comment about this chart. It is similar, but inverted, to the CalculatedRisk chart on employment.
It is absolutely as bleak as it looks, but I think exaggerated in one sense. The peak of employment in 2007 was part of the illusion of prosperity. Especially construction employment that was pulled forward by a decade or more. Without the credit boom, employment would never have reached those levels, so measuring current employment against the fake top is a little counter productive. It creates a false sense that we should aspire to be back at those levels.
Without the credit boom NOTHING would have reached those levels.
Here's a chart I posted to Delong's site today:
http://research.stlouisfed.org/fred2/graph/?g=1Z7
ONE TRILLION DOLLARS of credit flowing into the economy 2003-2007.
THREE THOUSAND DOLLARS of hot money a year for every man, woman and child. And this was only consumer credit. Corporate debt was also elevated then, $800B/yr or so.
It's no accident there was a global boom in 2005-2007. The world was getting happy on our growing indebtedness, which on a per-capita basis doubled between 2000 and 2008.
When we finally became tapped out, the recession hit. Big F'n surprise there.
But what stuns me is that this is not really agreed common reality. Many commentators go on about confidence fairies and whatnot but our actual sins are verboten to discuss.
Watchtower,
The part I find most interesting is that the exponential trend would have failed even if the unemployment rate would have held steady.
Maybe I should create a "what if" chart to show it.
We simply ran out of employment steam.
Mr Slippery,
My chart is very similar to the one at Calculated Risk. He aligned his based on the peaks of pain. I aligned mine based on when things started to fall apart.
As for Shiller, he seems like a nice guy. You can sense the optimist that wants to get out, but for the most part he's firmly grounded in reality.
I enjoyed watching the link to the video.
With the yuan at over 6 to the dollar who needs full employment.
We give them our money, they give us affordable stuff.
The problem though is the dollars we give them aren't coming back to us!
Kinda like the money we burn when we pump a tank of gas. When I pay $50 for a fillup, how much of that money reenters the paycheck economy eventually?
Knock a trillion off our annual federal deficit, via tax rises and spending cuts, and we'd begin to see reality rear its uglier heads.
I have no idea how the clowns running things are going to get our fiscal ship squared away for the baby boom retirement wave.
We've got a real 3/11 situation with that.
Troy,
I hear you. It was the debt in 2004 that first turned me bearish. ALL those easy money credit offers filling my mailbox was quite the omen, and when I say omen I mean in that Damien sort of way. Sigh.
Troy,
Kinda like the money we burn when we pump a tank of gas. When I pay $50 for a fillup, how much of that money reenters the paycheck economy eventually?
Why can't most mainstream economists figure that simple process out?
They don't think like simulations engineers?
Why can't most mainstream economists figure that simple process out?
That's a good question. There are only two possibilities. One is they are not smart enough, but I don't buy that beyond the undergrad level. The other possibility is that they are paid to peddle false religion to keep the flow of wealth upward.
If you watched the academy award winning documentary, Inside Job, you will see how top Ivy League economists are paid to support failed policies without disclosing it. Same for ex-Fed governors. Eye opening. The scam is engineered into academia and government policy.
The imbalances build up and nature deals with them when exceed certain limits, e.g. avalanche, flood, collapse. Same as it ever was.
I post this whenever I get the chance.
Dunno how airtight the case is, but it reinforces my own prejudices . . .
The Corruption of Economics: Neo-classical Economics as a Stratagem against Henry George
Troy,
They don't think like simulations engineers?
They don't think?
Just trying to reduce the equation a bit, lol. Sigh.
Mr Slippery,
That's a good question. There are only two possibilities. One is they are not smart enough, but I don't buy that beyond the undergrad level. The other possibility is that they are paid to peddle false religion to keep the flow of wealth upward.
Perhaps they did not bribe Shiller because they felt he was a given. I mean he does have shill in his name, lol.
No offense intended to Shiller.
Troy,
That's quite a read, especially starting in "III. The Bitter Harvest of Neo-classical Economics".
to my great sadness, Dr Gaffney is 87 and not 47.
his race is almost run, and I don't see anybody to replace him.
if I could do my education over I'd love to do a georgist PhD econ track. Combined with computer sims, this would pull econ out of the woo-woo and into the real world.
I'm not terribly happy with what Krugman and Delong have been writing lo these several years, either.
We're just buried in BS.
http://masongaffney.org/blog/index.php/2008/08/the-great-crash-of-2008/
Troy,
We're just buried in BS.
It is very disheartening.
I wish there were more rational economists out there, or at the very least fewer economists with biased agendas.
I'm not terribly happy with what Krugman and Delong have been writing lo these several years, either.
Other than perhaps Shiller, I'm not terribly happy with any of them.
If it would have been possible for a human to blow a gasket, then Mankiw would have killed me, lol. Sigh.
Troy,
I might be a tad biased, but Gaffney seems to get it. From your link...
*“Builders’ Illusion” sets in, where builders conflate the rise of land prices with a return on their building investment, boosting the incentive to build above what the actual return on building per se would justify. This is because building, however legitimate, entails buying and selling land, a form of “flipping”. Unearned increment becomes, for some parties, part of the incentive to build. Ditto for “flipper-remodelers”: it’s fun to remodel or just redecorate on a rising market. This illusion may be most extreme in large, selfcontained, integrated developments, where each building is expected, even in a steady market, to pay for itself in part by raising the value of adjoining parcels. The big developer, being human, may credit himself for the rising tide of the market in general. Such illusions, widely shared, can result in overproduction of new buildings relative to the basic demand.
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