How Bad Could It Get?

President-elect Obama was right to warn about a deep and prolonged recession, and to urge bold, immediate action to counter distressing trends in the economy and the jobs market.

His warnings are sure to be underscored tomorrow when the Bureau of Labor Statistics issues its monthly jobs report. Almost 2 million jobs were lost from December 2007, when the recession began, through last November, and economists are forecasting that at least another 500,000 more will have disappeared in December 2008. If so, this will be the steepest rate of job losses in the first year of any post-war recession. Without swift intervention, similar or higher monthly losses are expected to mount well into next year, and continuing weaknesses in the labor market are likely to persist for another two to three years.

More than 5.5 million jobs are likely to be lost during this recession unless a major job-creating stimulus plan is enacted.

According to projections by Mark Zandi of economy.com, unemployment -- which was at 5% at the start of the recession -- could reach 10.2% in mid-2010. That would be the largest percentage increase in the unemployment rate since the 1930s, a trend that is sure to touch every American family.

Although the absolute unemployment rate was slightly higher in December 1982, when it reached 10.8%, the rate of increase was not as extreme then. (Unemployment started at a higher level in that earlier recession). The rate of increase underscores the rapid pace of economic deterioration, which will likely drive down wages for all workers, even those whose jobs are secure.

A smart, immediate stimulus could dramatically change these grim numbers, although the coming year will be painful no matter what.
Obama is calling on Congress to pass a stimulus package that will cost $700 to $800 billion or more over two years. That amount could create 2.5 million jobs in the first year and a total of 5 million jobs in the first two years. If so, it would lower the unemployment rate by 3.2 percentage points, leading to a peak unemployment rate of around 7%. While unemployment will still be uncomfortably high, the stimulus package as envisioned by Obama would prevent double digit unemployment, give the economy a solid footing for future growth, and begin to meet long-term needs.

As Obama said in today's speech, the economy is certain to get worse before it gets better, but swift action on a recovery plan can significantly reduce the severity and length of this recession.

Comments

[pikaomega]

Lies, damn lies and the Bureau of Labor Statistics.

If a 7.2% rate of unemployment makes you want to weep, bear in mind that the 10.8% figure of 1982 was before the Reagan Era adjustment in the way the rates were calculated.

Hidden in the BLS report released on Dec. 9 is Table A-12, "Alternative measures of labor underutilization:"

http://www.bls.gov/news.release/empsit.t12.htm

Outlined are additional factors added to the existing calculations, including those who have been out of work for 15 weeks or more, part-time workers and those who have simply stopped looking. The seasonally adjusted amount when adding these alternative figures totals a 13.5% unemployment rate for December 2008.

So, like the sudden discovery that we have been in a recession since December 2007...a year later...the picture is much more dire than one is led to believe.

[Trebor1]

Why is it that so very few people seemed to be "up in arms" when the blue-collar workforce was being decimated over the last 25-30 years? Now, because it is affecting educated, white-collar workers, it is seen as some kind of national tragedy demanding immediate and sustained action by the government. Most of these "managers" were ok singing the company's song while their underlings were forced to compete with slave and prison labor in order to feed their families. Once all the blue-collar workers were gone, who did these guys think they were gonig to "manage?"

Managers' arrogance was their willingness to sacrifice all of their working-class neighbors on the altar of cheap consumer goods. Managers' ignorance was the belief that every blue-collar worker in America could be impoverished without it affecting THEM.

I loathe Sarah Palin, but even a broken clock is right twice a day. There is a terrible class-bias in the media.

[1EYEDKing]

It took years to create the situation facing our Nation. PhDs from Mackenzie & Co, and other think tanks have presented the pending impacts globalizatation would have on US wage earners to international business groups since the early 80's.
What was modeled then are the very results we see now. So why are so many economists seemingly caught off guard?

Do they really buy the ploy that the US is just experiencing a housing bubble lead recession? Hmmm. Lets hope not or we are in for a very long recovery indeed.
This chatter serves as a disguise to the real issue, i.e., corporate America"s wholesale aggressive policy to chase profits by outsourcing US middle and upper management workers across multitudes of industries and job class functions.
This continues to this day - with little National attention. Tonight US white collar workers are burning the night oil training foreign staffs who will work for 1/3rd the salary once the training is complete. These workers have no say. They are obligated to train their replacements or quite.

[1EYEDKing]

It took years to create the situation facing our Nation. PhDs from Mackenzie & Co, and other think tanks have presented the pending impacts globalizatation would have on US wage earners to international business groups since the early 80's.
What was modeled then are the very results we see now. So why are so many economists seemingly caught off guard?

Do they really by the ploy that the US is just experiencing a housing bubble lead recession? Hmmm. Lets hope not or we are in for a very long recovery indeed.
This chatter serves as a disguise to the real issue, i.e., corporate America"s wholesale aggressive policy to chase profits by outsourcing the US middle and upper management worker across multitudes of industries and job class functions.
This friends continues to this day - with little National attention. Tonight US white collar workers are burning the night oil training foreign staffs who will work for 1/3rd the salary once the training is complete. These workers have no say. They are obligated to train their replacements or quite.