The Economy is Even Worse Than You Think (from WSJ.com)
I read with great interest a recent opinion piece from Mortimer Zuckerman (what a great name) of the US News and World Reports. The title of this piece is "The Economy is Worse Than You Think" and is on WSJ.com if you want to read the whole article.
In a nut shell, he makes a number of important points that are often overlooked by the media and politicians (mainly because the news is NOT good). Here are a couple of excerpts:
"...reasons we are in even more trouble than the 9.5% unemployment rate indicates:
- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).
- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.
Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period."
In summary, the news is not very good. Government, businesses and individuals would be wise to take head of this data and evidence and make any necessary budgetary now. I would like to see the Obama administration start by focusing more attention (and tax dollars) on economic policies rather than healthcare and the environment, among other secondary objectives. While these issues are very important, the success of any reforms in these areas is ONLY possible if we have a strong economy. Thank you, Mr. Zuckerman, for your great analysis.
In a nut shell, he makes a number of important points that are often overlooked by the media and politicians (mainly because the news is NOT good). Here are a couple of excerpts:
"...reasons we are in even more trouble than the 9.5% unemployment rate indicates:
- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).
- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.
Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period."
In summary, the news is not very good. Government, businesses and individuals would be wise to take head of this data and evidence and make any necessary budgetary now. I would like to see the Obama administration start by focusing more attention (and tax dollars) on economic policies rather than healthcare and the environment, among other secondary objectives. While these issues are very important, the success of any reforms in these areas is ONLY possible if we have a strong economy. Thank you, Mr. Zuckerman, for your great analysis.
posted by Blogging Man @ 11:44 AM
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