Will the US Economy Ever Again See Full Employment?


How are things on the pampas?

Tolerably fair, it appears…

We just got here. Too soon to rush to judgment. From what we can tell, though, the poor Argentines seem to be shooting themselves in the foot…and the leg…and everywhere else. They’re going to be taking out buckshot for years…

It should be a great time for the pampas. They have some of the richest, flattest, best-watered farmland in the world. Farm prices are high. Other prices are fairly low.

But leave it to the politicians to mess things up. Argentine beef – which ought to be the country’s most prized export – is losing market share, especially to the Uruguayans. How come? Because the Argentines taxed beef exports in order to keep prices low at home. You see, the gauchos can manage an economy too!

What was the result? Farmers switched from raising cattle to raising soybeans. And wouldn’t you know it, then, they had a disastrous drought.

More on that story as we find out more…

In the meantime, let’s look at the hottest market in the world – the gold market.

Gold is so hot it’s hard to believe it won’t melt down. Watch out.

And remember, the bull market in gold is a distraction. The big story now is still the Great Correction. It’s here. It continues. And it will take years to sort out.

Consumer credit went down $3.3 billion in August – the 7th month in a row of decline. Just what you’d expect in a correction.

If this is not a Great Correction, it’s doing a good impression of one.

The New York Times:

In the one-two punch long feared by many economists, hiring by businesses has slowed while government jobs are disappearing at a record pace.

Companies added just 64,000 jobs last month, a slowdown from 93,000 jobs in August and 117,000 in July, the Labor Department reported Friday. But over all, the economy lost 95,000 nonfarm jobs in September, the result of a 159,000 decline in government jobs at all levels. Local governments in particular cut workers at the fastest rate in almost 30 years.

“We need to wake up to the fact that the end of the stimulus has really hit hard on local governments,” said Andrew Stettner, deputy director of the National Employment Law Project. “There is much more of a slide in the job market than what we really need to clearly turn around.”

With the waning of the $787 billion Recovery Act passed in 2009 and credited with increasing employment by millions of jobs, finding new policies potent enough to speed up the recovery has proved difficult.

Meanwhile, Investors’ Business Daily has more bad news. At the present rate it will take another 10 years to get those jobs back:

The US economy lost 95,000 jobs in September, far worse than expectations for no change in employment. More Census-related temp jobs ended, as expected, but state and local governments slashed staff far more than predicted.

So far in 2010, the US has added just 613,000 jobs – for a monthly average of 68,111.

Employment bottomed in December 2009 at 129.588 million – two years after peaking at 137.951 million. At this year’s pace, the US won’t recoup all those 8.36 million lost jobs until March 2020 – 147 months after the December 2007 high.

That would obliterate the old post-World War II record of 47 months set in the wake of the 2001 recession.

The current jobs slump also is the deepest of any in the post-war era, with payrolls down as much as 6.1%. They are still 5.6% below their December 2007 level.

With state and local governments likely to shed workers for at least the next year or two as budget woes continue, the hiring burden will fall entirely on the private sector.

Private employers did add 64,000 workers last month, but that was a little less than consensus forecasts and far below what’s needed.

The US needs to create 125,000-150,000 jobs each month just to absorb new workers and prevent unemployment from rising. So returning to the old peak employment a decade later would hardly suggest a healthy labor market.

It is worth pausing a minute to think about that last paragraph. It’s not enough just to get back the 8.36 million jobs that were lost in the crisis. The US also needs to create about 15 million MORE jobs over the next 10 years in order to stay even with population growth and return to full employment. That’s about 23 million all together.

Well, guess how many jobs were created during the last 4 months. None. Instead, the economy LOST nearly 400,000 jobs. So you could say that at the present rate, Hell will freeze before we recover those 8.36 million jobs…and it be even longer before the economy is back at full employment.

Does that sound like a correction to you? It does to us.

What happens to people in a correction? They get poorer. And here’s the evidence… For the first time in 70 years, New York residents are earning less money than they did the year before. This report from Reuters:

The recession put a 3.1 percent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released Tuesday. Paychecks or net earnings tumbled 5.4 percent, while dividends, interest and rent slid 8.4 percent, to a grand total of nearly $908 billion, the state comptroller’s report said.

Not only did New Yorkers’ personal incomes fall “almost twice” as much as they did in the nation as a whole, but they have yet to recover to pre-recession levels, Comptroller Thomas DiNapoli said.

The drop occurred even though the job-destroying recession was milder in New York than in the rest of the country.

One reason for the hit to New Yorker’s pocketbooks is Wall Street’s dominance among the state’s employers; pay and job security are often highly volatile in the securities industry.


Bill Bonner,
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.


  1. It looks like the Americans are taking outsorcing a bit too far……..


  2. Anything is possible, as this clip demonstrates…


  3. Can someone please explain to me (not the brightest guy in the world) how an economy can shed so many jobs , take on so much debt and showing no sigs of potential recovery have a stock market that keeps showing signs of measured growth???

    The stock market reflects the health of big business, people are loosing their jobs at a rate and magnitude greater than any other time in our history but big business is thriving?? Unless they are being paid to sack people what in the hell can explain this insanely obvious contradiction.

    I would also like to understand why in Australia we are so sure that we will never fall victim to the fete of the US because we are not effected by their financial instability but our market seems to mimmic every movement they make up ad or down e.g. they have a 3% rise, we have a 3% rise.

    Is there valid reasons for these things or is it all smoke and mirrors

  4. Realist the money printed and leverage created from near zero interest rate UST collateral isn’t landing in the US economy. It is going straight into carry trade. That’s why your AUD is at parity and your commodity prices are still high despite the US consumer lethargy. Any liquidity retained in the US just fills in extend and pretend asset valuation holes by expanding balance sheet sizes. They all know Bernanke’s helicopter narrative is rubbish so they won’t release the money into the US economy to melt up with inflation. Ben’s just another front man elected on the back of a stupid thesis they could use as narrative. Just like Obama the Eddie Murphy alter ego that fronts cheap penny lane tunes for a mass audience.

  5. Did you pick up that less-than-$300K Sydney apartment, Realist?
    (Seemed too good to be true… .)

  6. Thanks for the input Ross, u think you have given mr the answer I was searching for, it’s all just smoke and mirrors. I just needed to understand it a bit better, my knowledge of what is “really” happening inside the US economy as a whole is limited.

    Biker, be mindful that there appears to be someone else using the name if “realist”, I’m sure these apartments exist but at 2m x 5m they may nit be such a bargain at $300,000.

    Give it 6 months though, the property crash is coming Biker, won’t effect you in the Canada but it will punish the land downunder quite severly.

    If you won’t some actual facts to back this arguement just say please :-p

  7. Sorry it didn’t meet your needs, Steve!~

  8. Good one Ross. Benny Claus only lands on elite rooftops…ya know, they all have helipads courtesy of the Bennys workshop behind the discount window. People not doing Gods work get deflation.

  9. This is where I see trouble Ross. In the US anyhow. If your Joe average you get less money in the real economy and in your wallet but the big blokes bid up commods etc and govs raise taxes and charges. Its going to cause much discontent because people will start/are suffering. I cant see how this isnt going to cause an uprising. They love their guns over there.

  10. Ned, several days ago I requested a mutual friend to consider a blog on Retirement Finances. It may _not_ meet his site needs, although I imagine there would be scores of advertisers willing to flick him cash!

    Waiting for a response.

    If I get affirmation, I’ll post the list of Key Questions. If not, I’ll consider creating a website* to meet this need.

    * I’ve been operating a site for nearly eleven years now, getting over 20,000 hits per year some years. Not brilliant numbers, but it has proved lucrative for our organisation… . Will email you the URL eventually… :D

  11. Another question Ross. Does an ongoing carry trade increase the chances of Oz Gov borrowing to spend into the economy on scale to keep money on the street….at least in their favoured areas?

  12. Lachlan, thats the Mishkin-Krugman question and they answer “yes we can”. Doesn’t matter if its Greece or Portugal or Ireland or Spain (but not Hungary because the dopey Swiss lent them money in CHF and EUR) so the first four and all those like them including Australia and New Zealand can go on borrowing at low interest rates no matter how stupid and reckless they are. No problem, they just gin up some more USD and hand them to the IMF to keep the asset bubble pumped and then they asset strip us on the private current account. Welcome to the crony party!

    but will it keep working to save their hides – no – they are stuffed. All that USD money might be free to roam while they still have nukes to back the charade but it can’t work at home. Deflation or massive inflation. They know its deflation or bust and thats the reason they’ve been doing what they’ve been doing.

  13. Actually thought about the possibility of re-training as an FA with the focus being on retirement planning once Biker. Given that I have a general interest in the subject anyway. Then the thought crossed my mind that a far more hassle free and potentially rewarding option with less legal liability would be to re-train as a psychologist who specifically worked on assisting those who’d had dealings with FAs! :D

  14. Thanks Ross.
    You know I think the welfare state anomaly ensures that nobody will turn this present system around until it destroys itself. Maybe as an example you can look to the USA and consider several decades of Ron Pauls warnings and wisdom has proven benign. Until welfare fails completely few enough people will be uncomfortable enough to desire change. A relentless parade of bizarre economic events pass by.. while the populace barely seems to care less.
    Maybe if it all ended tomorrow, we economic groupies would be lost. Our favourite soap opera..gone :(
    Maybe I’ll be too busy garding my chicken eggs to care ;)

  15. oops.. guarding

  16. “…thought about the possibility of re-training as an FA with the focus being on retirement planning…”

    And all you’d have to do is deal honestly with all you served.
    You’d be richer than your GF, Ms G. Kelly, mate!~ :D

  17. 2008 and 2009 were not good years for FA’s to purchase Professional Indemnity insurance, as premiums were jacked up big time. Not surprising.
    2010 is a completely different story – premiums are down this year.

    Is that a sign that Insurers are confident about Australia’s economic prospects and following on from that, the advice being provided surely can’t lead to such losses again?

    Actually, I think it’s a practice called cashflow underwriting – get the dollars in the door, as the claims losses are more than offset by investment returns.

    I think it’s appropriate Financial Advisers are called FA’s, as that’s about the extent of financial knowledge that many of them have, if you get my drift.

    Canadian dollar is over parity against USD I notice too.

  18. Davo: “I think it’s appropriate Financial Advisers are called FA’s, as that’s about the extent of financial knowledge that many of them have, if you get my drift.”

    Absolutely agree!~

    Canadian dollar is over parity against USD I notice too.

    B-I-L and his missus, headed our way, will be a little relieved!~
    They should have bought some Ozbucks a few months ago, though….

  19. Hi Biker,

    I’ve actually learned a lot reading the blogs on this site, as well as the contributions from the various correspondents.
    More than any financial adviser ever taught me.

    I’m also now finding I understand more of what Ross contributes. Ross, you are obviously well educated, certainly in economic matters. (Not being facetious).

    I recall reading a Murray Dawes contribution a while ago about the US Dollar index and how if it dropped below 78, watch out below! Just watching some Bloomberg on Foxtel and see it’s at 76 and some change, which puts it into Murray’s dire prediction territory.
    If the DR people read these blogs, can we arrange for Murray to provide an update for free please.

  20. Have to agree that Ross provides us with a great deal to think about. Don’t always agree with all his views*, but there’s a depth of knowledge most of us, self included, just don’t have.

    “If the DR people read these blogs, can we arrange for Murray to provide an update for free please.”

    Great suggestion, Davo.

    * Once ran foul of a whole League of Rosses, who dominated a university faculty I was involved with back in ’87. “Stay away!” warned my friend. “They’ll eat you alive!~” Never did find out if she was right. Maybe Mark Knoffler was wrong…!~ :D

  21. Comment by Davo on 14 October 2010:

    I’m also now finding I understand more of what Ross contributes. Ross, you are obviously well educated, certainly in economic matters. (Not being facetious).

    Comment by Biker on 14 October 2010:

    Have to agree that Ross provides us with a great deal to think about. Don’t always agree with all his views*, but there’s a depth of knowledge most of us, self included, just don’t have.

    I must admit I have to read most of the posts from Ross just to make sure that I read into what is being said and comprehend it..
    His technical analysis is very good, I, like Biker, do not always agree 100% with his comments, I do however respect them fully. Everyone can read into the markets and gather information and interpret them differently. My only bugbear with technical analysis is that the market is as much, if not more, driven buy the emotions of fear and greed than the fundamentals. The “human element” of markets is volatile and can change on a whim.

    Watcher is also very good with technical analysis of markets, and I respect his posts too.. and don’t take offense Ross, I find Watchers posts a little easier to read ;) Can usually get away with reading Watchers’ posts once.

    October 15, 2010
  22. “Everyone can read into the markets and gather information and interpret them differently.”

    Agreed. Too many people use data the way a drunk uses a lamppost.
    For support, not enlightenment.

  23. That kettle is black!~ ;)

  24. Shoes, when I’m revising my book I am always aghast at how imcomprehemsible I’ve been. I mean always. Nothing doesn’t need to be rewritten and most of my self criticism couldn’t be printed. We used to have ‘dyslexic’ contributing here but I think I did his head in and drove him off. I listen to the sweet science boxing show on koori radio, I’m struck by just how respectful it is of people generally and how it makes a marker to aspire to.

  25. Many years ago I was asked to teach a class of adults basic maths Ross. The advice I was given was to start with the ‘metric system’ – Because bugger all of then would now anything about that! Yeah sure – It turned out that bugger all of them knew anything about those decimal type things that are used in the metric system. So I went back to the REAL basics and built up from there. Depends on the target audience and what assumptions one can safely make I suspect? As well as English expression – But any half decent journo should be able to edit that.

  26. Nah… Getting it right is difacult… erm(!) difficult… . :D

    Ending on a preposition* is a no-no, of course, not that any aspiring writer would commit a crime like that, even if tempted to. ;)

    * As Don once noted, I just can’t help myself. I’ll _hate_ myself when I’m sober again!~


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