9.5% unemployment is now a crisis. Add on top of that another roughly 7.6% considered "underemployed," that doesn't get as much publicity, and there you have a real crisis that is not going to improve any time soon. And why should it? The explosion of the housing bubble set in motion a series of precariously standing dominoes that started toppling into each other - starting with the banks. As bank losses suddenly started to mount as more and more subprime loans started to default, they largely stopped lending to all but the most creditworthy businesses, so businesses started to scale back to cut losses and one of the easiest ways was to eliminate employees. At the same time the value of most peoples' largest assets - their houses - were starting to fall, so more and more people began to curtail their spending.
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We now find ourselves in a position where the economy has probably bottomed out, but there is nothing in sight to indicate that any meaningful move upwards is coming. The economy needs consumer spending to drive it, but many people aren't spending either because they have lost their jobs or are afraid they might. Because of this same fear we now see a sudden increase in personal savings and deleveraging, all of which mitigates against the consumer spending that we need to begin to get us out of the recession. So here we are going 'round and 'round - no jobs, no spending; no spending no recovery. Then we throw in the wildcard of the November elections and we can be almost sure that nothing major is going to happen to shock the economy into recovery because of the new push for deficit reduction. So as I said earlier, why should the recession end? There is practically nothing happening to cause it to happen. We get some positive news one day then bad news the next. The positives have been outweighing the bad, but not by much, and it is "much" that we need to turn the economy around.
Now add one great big question - when the economy does start to improve, will people be able to go back to the jobs they had before the recession? In many cases, the answer is no. Manufacturing is the poster child for economic recovery. America needs to regain its leadership in worldwide manufacturing. 'Ain't 'gonna happen. For one thing, a huge amount of manufacturing has gone overseas and will never be back, so those jobs are largely gone forever. As important is the fact that in many industries technology has improved so much that productivity has continued and will continue to increase without adding employees to do it. One fact describes this perfectly. According to the Federal Reserve Bank of Chicago, what took 1,000 workers to manufacture in 1950 could be produced by 184 workers in 2009. There is a problem for the economy that will never go away.
The continuing process of creative destruction is seeing to the fact that many jobs that once existed in certain industries are gone forever. What are people going to do who have skill sets tailored to types of jobs that no longer exist in any quantity? What are they going to do to create new skill sets as the ones they have erode with long periods of unemployment? What are they going to do when they can't move across the country to where new industries might be springing up because they can't sell their houses? What kinds of jobs are going to exist or be created that will begin to absorb millions of people out of work now? How are politicians going to explain why they can't fix the problem? Eventually after blaming each other long enough, it will be apparent that they all are guilty. Then what?
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