580,000 jobs lost can never “look good” no matter how it’s spun.

If national unemployment (U3) reaches 9%, the more realistic U6) number could approximate 14%.

This downturn is unlike the past. It isn’t a typical correction, a spin off of excess. It has scared consumers because their home’s value has fallen along with their retirement nest egg. I believe it will strongly influence buying behaviors for years to come.

Atop the “old” worries of costly and rising entitlement and health care attributable to an aging population, we now have serious issues from energy dependence, insolvent banks, underfunded pension programs, a deep domestic recession during a global downturn, eroding manufacturing core, a massive surge in our national debt, fears that much of TARP has been wasted, fears that the stimulus expense isn’t going to stimulate new industry, new jobs, employment security; fears that Congress is inept incapable or uninterested in effecting needed change.

FYI, The adult civilian non-institutionalized population is growing about 2 million per year. About two-thirds of adults are in the labor force (the rest are retired, students, homemakers…). So we need about 110,000 jobs per month to absorb population growth (assuming the participation rate is steady).

Economists in general are brain-washed to assume that unemployment rate is a lagging indicator. But, not this time of business cycle.

When the unemployment is primarily caused by housing collapse, the unemployment becomes LEADING indicator.

This is one clear reason: the unemployed will hang on to their mortgaged houses as long as they can, but they will give up and go through foreclosures, banks collapse by severe foreclosures, liquidity dries up, people get broke further, consumer spending plummets, economy further collapses— Vicious cycles continue for decades. There is no glimmer of hopium.

The point is that The unemployed at current stage mean further foreclosures, which will get worse. Further foreclosures mean bigger troubles ahead.
That’s why the unemployment rate can rise even if we get modest payroll growth of less than 110,000 or so.

Related Posts:

• Excessive debt can have both effects (the inflation/deflation debate has failed to take note that both can co-exist).
• How you will feel as you approach retirement age?
• Are we in an eye where things have stopped getting worse in some ways?
• The FED has said, “no net new jobs for five years.” What does that mean?
• The Storm is developing to be a huge depression.

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