Friday, May 08, 2009

Unemployment in April

The official rate is 8.9%, getting close to one person in ten. U6 is 15.8%, more than one person in seven.

The average workweek is now 33 hours.

My own bet is a continuing decline in the economy, as people struggle with lost work, mortgages they can't afford, debt that has to be paid down somehow. This means reduced consumption. You aren't going to buy a new car, when you don't know how to pay for your house.

If consumers aren't buying, then businesses are not going to be investing and will probably be laying off. Income of every kind declines; tax revenues go down; and state and local governments lay off workers.

On top of this contraction is the financial mess. Many pension funds, private and public, have invested in the fancy financial instruments that Wall Street invented and claimed were safe, triple and double A rated. Many of these investments are worthless. Once they are written down, the pension funds are going to be worth far less than they thought, and this means retirees are looking at smaller pension payments. This means less consumption and a further contraction of the economy.

The only thing we have going for us is the federal government's stimulus plan, which many economists think is too small.


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