US unemployment and the Technicolor depression
Unlike the black and white depressions that have preceded it, the current US depression – and it is a depression if unemployment is measured the same way it was in during the 1930s – this one is Technicolor.
Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (dailyreckoning.com).
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Stocks ended Friday trading not much higher than where they began. Gold rose $3. Oil is trading over $80 a barrel this morning. And stocks in Asia are “recovering” from the Fed’s discount rate increase of last week.
If the market wanted to crash, it would have plenty of reasons to do so. China is tightening bank lending rules. Here in the US, there is the aforementioned Fed discount rate increase. In Europe, Greece is going back to the marketplace to raise more money. And in the Mideast, today’s news tells us that many Kuwaiti could be wiped out by the latest downturn in their multi-billion dollar investment industry.
Many things could go wrong; something will.
If no panic comes it is because the market is just not ready to panic. Still, we leave our “Crash Alert” flag flying…and stand clear. There is just more downside to this market than upside. Markets are always discovering what things are worth. We don’t want to be holding a lot of stocks when the market discovers that they’re worth only half what we paid for them. So, the flag stays up…until prices come down.
Gradually, people are coming to two contradictory realizations. On the one hand, there really does seem to be a kind of economic renaissance going on…or, at least that is what you might think if you read the business and investment news. On the other hand, people are also coming to realize that we’re in a depression.
We’ll leave it to the mainstream press to describe the rebound, such as it is. We’ll focus on the depression.
“Millions of Unemployed Face Years Without Jobs,” says The New York Times.
Readers may wonder what kind of economic renaissance fails to produce jobs. Answer: a depression.
As we’ve opined many times in the past, a depression is not just a time when people stand in line to get bowls of soup or sell apples on street corners. It’s a time of adjustment…when mistakes of the previous boom are corrected…and a new economic model is found for going forward. This doesn’t happen overnight, no matter how much federal money is put to work helping it. In fact, the government money just gets in the way…distorting the picture and delaying the necessary changes.
Those black-and-white depression days of the ’30s are gone. Now, we have a depression in full Technicolor…with plenty of shades of gray, too.
More people today get food handouts than ever got them in the ’30s. We call our soup lines the Food Stamp Program. More people are out of work too….
…but here you have to look carefully at the figures to understand it. In the ’30s, there was no public safety net. No unemployment compensation…no severance packages…and no government welfare. People didn’t give up looking for a job; they had no alternative. They kept looking until they found something. Either you were working…or you were jobless. If we reported the numbers the same way they did in the ’30s…the number would already be up near Great Depression levels…at about 15% to 18% joblessness.
But there’s something else. Now, there are more people per household working. Back in the ’30s, the man of the house was the one that had a job. Typically, the family relied upon him, and him alone, as the breadwinner.
And guess what? If you look at the men of the house…men 25-54…what you see is that one out of every 5 of them is out of work.
For men…this is clearly a Depression…no, it’s worse. Not only are they unemployed. They’re going to stay unemployed for a long time. Because it takes times for a depression to do its work. And when it is over – maybe five or ten years…or 20 years ahead – not only won’t they find their old jobs again…they may never work again. And they won’t have wives or families either.
Men’s jobs are disappearing – jobs in manufacturing and building. As the NY Times explains, they probably aren’t coming back any time soon. What’s more, studies show that the longer a person stays unemployed the harder it is to get back into the workforce. Employers don’t like to take a chance on someone who’s been out of the job market for a long time. They’re afraid they’ve lost the habit of work…or that there’s some other reason why they have been out of work for so long.
Women’s jobs…in information and services…are doing relatively well. So, men not only lose their incomes…they lose their places in the family, and in the world. What woman wants to marry a guy without a job and without income? Not many. During the Great Depression, marriage and family were almost automatic. People got married. Then, for better or for worse, they lived in families.
Even before the depression began, marriage had become optional. Women get more college degrees than men. They typically don’t like “marrying down.” They delay marriage while developing their careers…and then, when they are ready to marry, it’s hard to find a suitable man.
Result? Well, we don’t know where this leads. But it doesn’t look good for the beer-swilling, football loving X chromosome half of the population.
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