10/20/2009 05:12 am ET | Updated May 25, 2011

"These Jobs Are Not Coming Back"

The unemployment rate climbed to 9.7% last month, a 26-year high...and the media told us that this is a good thing. "[W]hether or not today's and other recent reports overstate the case, the improving trend of the labor market after the autumn/winter carnage cannot be denied." Ah, yes. The trend.

First of all, let's be clear what trend we are talking about. We've lost a lot of jobs, and we are still losing them -- that is the trend.

Trying to spin that into a good thing is like putting lipstick on a pig. For the job situation to be "improving" requires that we stop losing jobs.

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What's more, the job situation is somewhat more bleak than the news media is reporting. To understand that we need to delve into the numbers.

The unemployment numbers of the past two months were revised upwards to include another 46,000 job losses.

You should expect to see lots more of that in coming months because of the Birth/Death Model, which counts theoretical business "births" and "deaths". It added 116,000 theoretical jobs last month, 26,000 more than it did in August 2008.

And then there is the seasonal adjusting again. Note the number of people no longer counted as in the labor force, thus doing their patriotic duty to hold down the unemployment rate.
In the seasonally adjusted numbers it rose 143,000, while the subset of those still wanting a job rose 381,000.

But if you look at the non-seasonally adjusted numbers you find people no longer counted in the workforce rose 1,578,000 (an enormous number), while the subset of those still wanting a job rose 516,000.

Then you have to look at the types of jobs being lost.

First, employment in this survey showed a plunge of 392,000, but that number was flattered by a surge in self-employment (whether these newly minted consultants were making any money is another story) as wage & salary workers (the ones that work at companies, big and small) plunged 637,000 -- the largest decline since March (when the stock market was testing its lows for the cycle).

The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed -- again a record high -- and this is a proxy for permanent job loss, in other words, these jobs are not coming back.

Think about that for a moment.

Maybe some of you reading this are old enough to remember the early 1980's, and the job destruction in the Rust Belt. Remember how many cities never recovered from that, and how the economy permanently changed.

Now consider that things are worse now, and that we aren't just talking about the Rust Belt anymore. It's everywhere.

Given that, do you really think we will be seeing any serious job growth in the coming years?

There are now 223,000 fewer jobs in America than there were in August 1999. Meanwhile the country has 33.5 million more people.

That hasn't happened since the Great Depression.

The unemployment rate for adult males is already over 10%. For teenagers its 25.5%, the highest on record. The average duration of unemployment is also at the highest (24.9 weeks) since records started being kept in 1948.

The preconditions for job gains, longer hours for part-timers and taking on additional temporary employees, was not met last month.

Despite all these depressing numbers, there are two numbers that make it even worse.

The first number is 1.3 million. That's the number of people whose unemployment benefits are going to run out by the end of the year. 500,000 will exhaust their benefits before the month is out.

These people are going to lose another strand of the increasingly thin safety net. Right now more than 50% of people who collect unemployment exhaust their benefits before finding another job -- another record.

Workers aren't the only ones running out of unemployment money. The states are too.

[Eighteen via latest updates] states have simply run out of money to pay benefits and been forced to borrow from Washington a total of more than $8 billion. That number is almost certain to grow as more states reach the brink. If they are not able to pay that amount back before 2011, which most will not be able to do, they face paying hundreds of millions of dollars in interest.

Many have been maintaining close to zero reserves [4] for years, well before the economy headed south. California, for example, got into trouble by raising benefits without increasing taxes. Other states, like Michigan, lowered taxes to unsustainable levels and watched their reserves dwindle.

Now, these states will be forced to raise taxes or cut benefits in the middle of a recession -- just when those changes will do the most economic damage.

The second number is 40%. That's the percentage of people collecting food stamp who are also employed -- up from 25% just two years ago.

These people have watched their hours being cut to the point that they can no longer make ends meet without government assistance. Yet they are still listed as being employed.

On top of that, 34% of workers have one week or less in savings.

The job situation in this country will continue to get worse until the reasons for those job losses are addressed. The economy didn't break because the American consumer bought too few cars and houses. So tax credits to encourage people to buy more cars and houses doesn't solve the problem.

The problem is that Americans have too much debt and too little savings, and the country doesn't manufacture the goods that the rest of the world wants to buy. Until that changes jobs will continue to be scarce.