Among the things that Rosie looked at in doing his analysis is the so-called Under-employment Rate (U-6) minus the Unemployment Rate. A chart of that difference looks like this:
The average difference between the two is just over 4%; it's currently a record 7.3% (17.5 - 10.2). (U-6 is only available since 1994.) Now, we can get back to the long-term average many ways, but it's certainly not out of the realm of possibility that one way we'll do so is to see unemployment at 12% while the U-6 drifts back down toward 16%. Would anyone consider that possibility crazy?
On a related note, continuing to add to the file on the plight of small businesses, I came across the following information over the weekend as to their importance to our economy:
Small firms (<500)
• Represent 99.7 percent of all employer firms.
• Employ just over half of all private sector employees.
• Pay 44 percent of total U.S. private payroll.
• Create more than half of the nonfarm private gross domestic product (GDP).
• Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
• Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
And, perhaps most importantly:
Firms with fewer than 500 employees accounted for 64 percent (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008.
This is the group that, according to the NFIB's monthly SBET [.pdf], is simply not seeing much light at the end of the tunnel. So the question needs to be asked: When the NFIB reports that the country's "job generating machine is still in reverse," and we know that its member firms account for ~64% of net new job creation, how are we going to achieve sufficient job creation to make a meaningful dent in the un- and under- employment rates before Rosie's forecast comes to pass?
Here's what the SBET survey looks like with regard to Hiring Plans:
So, hiring plans for small business are, in fact, incrementally worse now than they were one year ago (-1 vs. 0). There's no more inclination on the part of this business cohort to add employees now than there was one year ago, and in that period the unemployment rate has increased dramatically. Makes Rosie's forecast seem fairly uncontroversial to me.
1 comment:
It probably would breach 12-13% if the government stopped claiming that more and more workers are dropping out of the labor force.
Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn't account for the relationship between population density and per capita consumption.
Following the beating the field of economics took over the seeming failure of Malthus' theory, economists adamantly refuse to ever again consider the effects of population growth. If they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.
And these effects of an excessive population density are actually imported when a nation like the U.S. attempts to trade freely with other nations much more densely populated - nations like China, Japan, Germany, Korea and a host of others. The result is an automatic trade deficit and loss of jobs - tantamount to economic suicide.
Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)
Pete Murphy
Author, "Five Short Blasts"
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