Metamorphosis Consulting, Inc.

Management Consulting Firm

Economic Considerations – The Long and Winding Road of Unemployment

by

Beetles fans may think that “The Long and Winding Road” is a famous song written and composed by Paul McCartney. Although that may be true, in 2012 it more accurately describes the employment situation and journey to economic recovery in the United States. The Bureau of Labor Statistics data released for July, offered more proof that it’s going to be a long, long time before we see significant job improvement in the U.S.

With all the political hoopla, it’s important we get this straight. It doesn’t matter who is elected president in November. We aren’t likely to see healthy job statistics for years to come. Consider the following points:

  1. New Jobs – It would take approximately 250,000 new jobs added per month to rapidly improve the unemployment rate. So far this year, we averaged only 151,000 new jobs per month or about 100,000 short of what we need to see an improvement.

New job creation in July, according to the BLS, was 163,000. That’s still 87,000 short of what we need to start recovering.

  1. The unemployment rate – once again rose from 8.2% to 8.3%. Unemployment rates of around 5.5% are considered normal.
  2. Labor Force – 150,000 Americans left the active labor force in July. A total 7.5 million have left since June of 2009. Yet, many, if not most of these people have just given up looking for a job and probably should have been counted in the unemployment statistic. If the 150,000 that had given up looking for jobs in July were still counted in the unemployment rate, it would be even worse than 8.3%.
  3. The Underemployment Rate – We must not forget U-6, the underemployment rate. This includes people working part-time or for minimum wage because nothing else is available. If we add this group to the unemployment rate, the statistic jumps to 15%.

When you take into consideration all of the above 4 points and the present state of the economy, you begin to appreciate the potential for the U.S. to experience a lost decade with little or no improvement, much the same as the one experienced from 1991 to 2000 in Japan. For a buyer or a seller to postpone an important life decision without taking into consideration that the certainty they’re looking for could take 10 years to achieve, would be foolish. A more sound strategy would be to respect present economic conditions AND MOVE ON WITH YOUR LIFE!