Unemployment Rate Hits 26 Year High

Today the Department of Labor released its monthly economic appraisal and while not really surprising, the news is certainly not good. For the month of October the U.S. economy lost 190,000. That marked the 22nd consecutive month that jobs had been lost. It also raised the current unemployment rate of our country into the double digits. Unemployment now stands at a staggering 10.2%. This is the highest that rate has been since 1983.

Now this news was unexpected, but it still comes as quite a jolt when you see the actual numbers in print. In yesterday’s post about the pace of job losses slowing I mentioned that good news  did not mean that the unemployment rate would be going down. It didn’t, and most people don’t think it will for quite sometime.

One of the most alarming aspects of the report in my eyes is that the greatest job losses for the month were in construction, manufacturing, and retail sales. These industries are really the corner stones of our economy. When those industries are going good, the economy is going good. When their going bad, well you can see how things are.

The NY Times has a very informative article from today entitled “U.S. Unemployment Rate Hits 10.2%, Highest in 26 years”. That article talks about what these figures mean in the here and now, as well as for our long term economic recovery.

“There’s no doubt that the slashing and burning of jobs has abated quite a lot,” said Allen L. Sinai, the founder of Decision Economics, a research firm. “The economy is recovering, but it is a very soft recovery.”

Dean Baker, a director for the Center for Economic and Policy Research, said he did not expect declining unemployment rates until next spring. “We may be looking at very high levels,” Mr. Baker said, “barring a policy response, for several years into the future.”

As long as more jobs are being lost than new people being hired, the unemployment rate is going to continue to rise. We certainly aren’t close to seeing that equilibrium reached but as long as we’re heading in the right direction that has to be seen as progress.  Eventually the unemployment rate will peak, the question becomes just how long will it take between a slowing incline and that peak to be reached.

The fact that the incline is slowing shows signs that we are indeed recovering. Things are getting better even though the unemployment rate continues to climb.

The economy did expand at a rate of 3.5% in the third quarter, unfortunately there is no way to force companies to use those profits for new hires. Companies right now are still not convinced that the recovery is lasting. Until that happens their going to squirrel away those profits to prepare for the worst rather than expand. What’s troubling here as well is that worker productivity has increased. This is due to the fact that people are scared about losing their job and thus working their asses off. Unfortunately, it doesn’t really inspire companies to think they need to hire more people. Why hire more people when you can just get the existing ones to work harder through fear.

For people that are currently unemployed and looking for work all we can tell them to do is have patience. All we can do is urge people to keep at it and stay out there sending out resumes. I think they are doing that. Remember that the unemployment rate only counts people that are actively searching for work. There are people out there that have become so dissatisfied with the situation that they have simply given up. Those people don’t even count towards the rate. So the actual numbers of people that don’t have jobs are even higher than the rate.

Consumer confidence is still sitting very low. While companies continue to not hire new workers. I think there needs to be a little give on both sides. Everyone from consumers to employers needs to believe a little in order for this situation to work itself out. Each side is dependent on the other side, but neither can sit and wait for the other one to take the steps we need. It has to be a group effort and that’s why things are moving so slowly.

Recovery is indeed happening, but its at a slow pace and that’s what is so frustrating for a lot of people. Unfortunately there are no easy fixes for the situation. Sure we can throw more band aid stimulus packages out there, but any effect from those is going to be short term. The only thing that can really fix this economy is time.