Times are tough all over, and that MIGHT just be a good thing.
I have a confession to make: In the summer of 1974, I seldom wore a jacket and tie. It wasn’t so much that I had abandoned all efforts at propriety or decorum. I just had precious few reasons to dress properly.
There were, of course, occasional if somewhat fruitless job interviews. Oh, and one court date. (I assure you, the trespassing charges were dropped when I explained to the judge what I was doing in the middle of that farmer’s field, in the middle of the night, with a jug of cheap red Italian wine, a boy scout flashlight, a fine old driver, and 146 nicked golf balls).
The crux of the issue (both issues, really, when I stop to think about it) was that there was precious little productive work available that summer for a young man near the bottom of society’s great ladder.
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Tough Times…
Those were tight times. Total unemployment was hovering around 5.5% and climbing. Not too particularly bad by and of itself, but well on its way to getting far worse (by the following summer, it would peak at 8.8%).
Add in inflation well over 10% back then, and young men like me were getting squeezed from both sides. Simply put, young women in my neck of the woods were only interested in guys with new Camaros, and what with the price of gas quadrupling to an outrageous 55 cents a gallon, and hardly any work about, well, solo rounds of midnight golf were about as good as it was going to get.
I only bring this up because some moron talking head on cable has just noted that the current job loss rate is on par with those halcyon days. Over the past two months, some 1.1 million Americans – young and old, male and female – have been fired from their jobs. Over the past three months payrolls have fallen at a 5.1% annualized pace.
And Getting Tougher
Nor do we see any signs of this trend breaking. Indeed, some rather reputable thinkers on the subject have posited that the official unemployment rate may hit 9% before truly turning the corner in early 2010.
Now, I know 9% unemployment seems like a truly dreadful figure. Certainly it is enough to stimulate many to contact their congressperson to ask: Just what is going to be done about this travesty?
In most any European capital, mind you, they would call 9% pretty much full employment. And on our own side of the pond, Mexico City would kill to see numbers that low.
But we here in the States are extremely intolerant of unemployment. As I have pointed out in the past, anytime that figure exceeds 7% or dips below 4%, we fire the party in control of the White House.
But Is That Really the Problem?
You see, we have an economy primarily driven by borrowing and spending. And realistically speaking, an additional 5% of folks cutting spending in half due to joblessness (hey, even the unemployed have to eat, right?) is not really enough to scuttle that economy.
The problem is that when we are losing jobs at such a ferocious rate, the 91% of us who remain gainfully employed (and even sometimes over-employed, covering the work all those deadbeats abandoned) tend to cut back on both borrowing and spending.
And so amidst all this craziness, we see the oddest things, like government officials bemoaning the fact that Americans have increased their savings rate to a whopping 3.6% after taxes.
Those dastardly villains! Don’t they know that it’s their patriotic duty to run up their credit cards buying cheap lead-covered Chinese toys!
The Wrong Decade…
As tempting as it is to compare the current situation to those fine days of big hair, wide ties, ridiculous bell bottoms and “Whip Inflation Now” buttons, it may just be possible that we are off the mark (or at least the era) with that idea.
You see, from a regular working stiff’s point of view, a job is a benefit. A pretty darn essential benefit – kind of like air, food or water – but certainly something one tends to tot up on the plus side of the ledger.
But from an employer’s point of view, labor is a cost much like most any other cost – like raw goods, building rent, lights and power, for example.
And right about now, most all of those costs are down.
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And the Wrong Conclusion
So all we really need to do is get that 91% to feel a little better about things, and loosen their grip on the purse a tad, and maybe we can get this ball rolling again.
Here’s a thought that might help them relax: We have actually seen unemployment this high before, and in relatively recent memory to boot. It was in the fall of 1982 and winter of 1983. During those cold, cold months, one out every 10 adults was sitting at home collecting a state check.
Guess what was about to happen to the rest of the country? Over the next 18 months or so, the companies of the Dow Jones Industrial Average took advantage of reduced overhead to rise without pause, nearly doubling in value.
The Best Sort of Bad News?
Over the next 17 years we would certainly see a scare or two, but trend-wise, the market never looked back. By January 2000, the Dow had added some 11,000 points for a gain of 1,400%.
To be clear, I don’t wish to be some kind of contrarian Pollyanna who sees bright silver in every single cloud, or an automatic buying opportunity in every downturn. Sometimes a cigar is just a cigar, as Freud was wont to say.
I’m just saying that we don’t know yet how this will break. For now, I remain primarily bearish because the trend in play right now is bearish. That’s just simple practicality. But it is still a bit early to describe our times in biblical “end-of-days” terms.
Just keep your shoes tied, loose folks, and be prepared to move when the time comes.
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