Welcome To The New Normal (Double-Dip Recession)

And What We Don't See
The Statistical Recovery
A Double-Dip Recession?
Welcome to the New Normal
Birthdays, New Orleans, and then the Road Trip from Hell

Unemployment is high and rising. But if the recession is over, won't employment start to rise? The quick answer is no. We look deeper into the Statistical Recovery and find yet more reasons to be concerned about near-term deflation.

This week we consider all things unemployment and ponder the need to create at least 15 million jobs in the next five years to return to a full-employment economy - and the implications for both the US and world economies if we don't. Economic is often about what we can clearly see, and yet it is understanding what we can't see that gives us true insight. We start with a collection of facts that we can see and then begin a thought exercise to find the implications.

First, the unemployment rate is now officially at 9.7%. We are approaching the official high we last saw at the end of the double-dip1982 recession. In the chart below, notice that unemployment rose throughout 1980 and then began to decline, before rising rapidly as the economy entered the second recession within two years. Also notice the rapid drop in unemployment following that recession, as opposed to the recessions of 1991-92 and 2001-02, which have been characterized as jobless recoveries. Unemployment was as low as 3.8% in 2000 and saw a cycle low of 4.4% in early 2007.

I keep hearing the question: "Where will the demand come from to stimulate the economy?" If any answer is given, it's usually "more government spending". Now, I know that I'm not as smart as most of these overeducated morons, but I have spent all of my life in the real world, as opposed to academia and government, and as a successful small business owner I have an excellent rule-of-thumb understanding of economics, and I'm here to tell you that the true answer is not more government spending, which is worse than useless, but exports.

That's right. Exports are where the growth must come from to stimulate our economy. Of course, weak man Obama will not force open the protected markets of China, Japan, and South Korea (in fairness, no one else has done so, either). They have the money and they have the demand, but for political and philosophical reasons they are deeply protectionist, and that will be an incredibly tough nut to crack, but it can be done given enough arm twisting and political will.

There is no other way.

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