Sunday, September 27, 2009

Private Sector Unemployment 23%

Thanks to data from the BLS who gives the official unemployment rate of 9.7% we can give an approximation of the private sector under/unemployment rate which sits at 23% (22.978) Of course the data still shows that this is in fact a he-cession giving official rates of 10.1% unemployment for men vs 7.6 for women. Look for those numbers to diverge even more with the end of the construction season.

I found the below table regarding unemployment during the 1st Great Depression. Unemployment peaked at 24.9% in 1933 but was only 3.2% just three years earlier. We haven't seen that low an unemployment rate since 1952. The St. Louis Federal Reserve's "Fred" is kind enough to show that this "recession" is the longest since the Great Depression, and if you have a strong stomach, see the spike on the right hand side which is the increase in the monetary base.

Year -- Unemp. Rate
1929 -- 3.2%
1930 -- 8.7
1931 -- 15.9
1932 -- 23.6
1933 -- 24.9
1934 -- 21.7
1935 -- 20.1
1936 -- 16.9
1937 -- 14.3
1938 -- 19.0
1939 -- 17.2

Now looking at the above numbers and trying to compare them to our current situation is difficult because I do not have access to the number of public sector jobs at that time. Of course it is a fair assumption that the public sector grew by leaps and bounds at that time and one could make a reasonable assumption that the reason that the unemployment rate went down from its 1933 high is due in part to growth in the government sector. The extent to which that growth affects the unemployment rate is what is not known (to me at least.) But from my viewpoint we are looking at very similar rates of unemployment between the Great Depression and the Obama Depression. The early part of the last century the workforce was almost entirely in the private sector. There was an opportunity at that time to suck up a large amount of un/underemployed and put them to work in the public sector which of course is one of the ways the FedGov responded. But that is not such an easy option anymore as 1 in 3 jobs is a public sector job already. I don't think that it would be possible to get above 50% and even if it could be done it could not possibly be sustainable (without major exportation of natural resources.) Because of this I believe that we are on more fragile footing than we were at that time. There are less "easy" answers available to us since we used them up previously and never bothered to let those public sector people go back to private sector employment, plus not to mention all those who survive upon government money (retirees, social security, medicare, etc.)

For the record, to get to a private sector unemployment rate of 25% we would need to lose another 2.3 million jobs. I can't see that happening this year, but depending upon how christmas turns out we could potentially see that by late spring next year.

The so called experts are saying that we are now in a "fragile recovery" which I sincerely hope is true. I wouldn't bet on it, but I sure would like to see the economy recover.

Note, the BLS numbers are for August. I will try to post again once the September numbers come out.