First, are the numbers reported seasonally adjusted? That could account for the difference in real numbers and percentage unemployment. There is a natural hire/layoff cycle in some industries that isn’t unhealthy, and can skew statistics either way.
Second, there are more than one driver of this recession. There was the credit crunch, housing collapse. Oil prices definitely contributed. And there is the normal stacking of stupidity at the top that recessions clear away. And throw in the new generation that is doomed to learn the same lessons that their predecessors learned the hard way.
Third, the systemic flaws of the US economy. It is 70% or so consumption. There are already 3 cars per household or something like that. Consumers could stop buying other than food and repairs for a couple of years without any problem. And they will if they feel insecure, or are trying to pay off debt. And everyone needs to pay off debt. No choice.
Any increase in demand for oil will drive the price up again.
The eternal trade deficit has caught up. The US dollar will drop, raising prices of commodities. The challenges of reindustrialization are huge. No matter how it is done, it will take years.
And throw in the inevitable. Tax revenues are falling off a cliff. Government cannot cut costs without serious and intense pressure. So taxes will go up in their various guises. The easiest politically is to increase the costs for business. And anyone in the market for credit is now competing with the US treasury. At the same time the IRS is getting beefed up.
The Obama industrial policy has a natural unemployment rate of 10-12%. In good times.
And right now no investment will happen in health care until it’s clear what the government will do. Same in energy. What percentage of the economy is that?
If you start adding up the sectors of the economy that are either sitting on their hands, moribund or just plain gone, it is considerable.
The stock market was somewhere around 14000, now at 8500. Does it make sense to apply that percentage to the economy as a whole as a base point.
Those graphs are describing a reality that we haven’t quite begun to comprehend.
Derek
