Job Losses in Context

How do the job losses during this horrible recession compare to past recessions?  There are a couple of graphs at this post at Calculated Risk that provide some context.  More people have lost their jobs in this point in the recession than any other recession since WWII: 3.6 million.  That’s actually more than any other maximum loss.  The 1982 recession came close with 2.8 million people.

When job losses as a percentage of work force is examined, this recession is in the top 30%.  We just passed the percentage reached in the 1981 recession: 2.5%.  At this same point in time, only three recessions were worse: the 1953, 1958 and 1948 recessions.  The total number of workers has obviously increased since then, so more people would have to lose their jobs before the percentage in this recession got to 4% or 5%.

I doubt undocumented workers were counted in any of these calculations.  I would imagine the actual total of people who have lost their jobs, documented and undocumented, would come much closer to previous steep job losses.

Also clear in the graphs: the last three recessions took much longer to recover from than did previous recessions.  Maybe because we don’t actually make things in this country the way we did in the immediate post-WWII era.  If things aren’t made in the U.S., U.S. workers have nothing to do, limiting the job recovery that would otherwise occur.  How patriotic of the pro-job off-shoring crowd.

Companies Making Economy Worse

I wrote about this late last month – companies are going to make the recession deeper and longer.  It’s not hard to figure out why.  Two-thirds of the U.S. economy is made up of consumer spending.  In order for people to spend money, they need access to money.  Instead of increasing wages, Cons decided to make credit more available via credit cards since the 1980s and mortgages in the past decade.  Households owe more than they make on a yearly basis: credit card debt is massive, which led to people borrowing against their equity in order to keep buying stuff.  Now, housing values are less than what people owe on them.  They only thing left is wages, which haven’t increased for a super-majority of Americans in 30-some years.

In order to continue making profit so shareholders and executives can be paid enormous sums of money, corporations are laying people off.  That means … people won’t make money.  That means they can’t pay their bills or buy stuff.  Let’s see.  If people aren’t employed, one of the things they can’t pay every month is … their mortgages.  When people don’t pay their mortgages … they get foreclosed on.  Sure enough, the trend is being picked up and is being reported.  Job losses are now fueling more foreclosures.

In order to minimize the recession we’re already in, companies need to be hiring people.  Americans making an income can pay their bills and buy things, keeping the economy afloat.  Companies have initiated a negative-feedback system.  As more people have less money, they’ll buy fewer things.  Companies looking only at their quarterly numbers will fire more workers so they can continue to pay stockholders and executives.  And so on.  Companies will have to wait until their actions are countered by other economic forces.  But how many Americans will lose their jobs in the interim?

President-elect Obama is inheriting an incredibly challenging economy.  It will take visionary work, of the style he has, to lead the country to a better economic future.