Massive U.S. Employment Depression and Global Slowdown Threaten Earnings

September 3rd, 2011
in contributors

by John Lounsbury

Every body focused yesterday on the zero growth in non-farms payrolls in August.  But if the number had been +100,000 or even +200,000 the serious nature of the employment crisis in this country would not have been changed.

The following from shows a different view of the dismal employment situation.  Click on graph for larger image.

Follow up:

The current number of non-farms payrolls is below those of 1999-2001.  The population has grown from about 280 million in 1999 to approximately 312 million today.  So, adjusted for population growth, employment is in much worse condition than the above graph indicates.

The following graph shows the non-farms payroll data normalized to total population.

The above graph shows that employment levels (as measured by non-farms payrolls) have fallen back to early 1987 levels.

The other factoid taken from the above graph is that population normalized employment has reached the low point of a recession that started at the turn of the century.  There was a failed attempt at a recovery 2003-07.  Then the recession resumed.

The title of this article could well have been "Non-farms Payrolls at Levels not Seen since Early 1987" or "More than 24 Years of Employment Gains Lost."

What the graph is specifying in hard data is an employment depression starting in 2001 and still deepening.

While the U.S. stock market can be supported in this massive depression by global earnings, if global economic activity slows down where will support for current earnings come from.  And more earnings growth from here?

Europe is definitely slowing under the austerity demands stemming from the sovereign debt crisis.  Asia is slowing under the attempts of central banks to stem inflation.

Where is the growth going to come from?

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  1. NoviceEconomist says :

    Any insights on why the non-farm payroll normalized for population continued to decline for 2-3 years after the end of last two recessions in '91 and '01

  2. Loy Rickman says :

    Unless I misunderstand what is said here, I believe it should be "More than 24 (vice 14) Years of Employment Gains Lost."

    Great (and scary) article. Do you (John and Steven) ascribe this primarily to globalization wage arbitrage?

    Thanks, Old_Rick

  3. Admin (Member) Email says :

    Old_Rick and Novice - - -

    Old Rick has the primary reason as wage arbitrage was already underway with Mexico in 1992-94 on two accounts (the flood of immigration from south of the border was starting in earnest and NAFTA was being implemented.

    After the turn of the century global wage arbitrage was in full swing and this extended deeply into manufacturing, technology and some service sectors.

    Old_Rick, thanks for the heads-up on the 24 years. You now know that I am counting challenged and, after taking off my shoes and socks, need a second person to count over twenty. My wife must not have been available when I counted to 14 and got confused.

    The article has been updated.

    Steve may comment separately if he sees something I have missed. We often think independently from each other and sometimes come to different conclusions.

    John Lounsbury

  4. admin (Member) Email says :

    Old novice re: globalization and wage arbitrage

    I do not put wages in the primary reasons for the USA's employment shortfalls. If wages were the primary problem, you could not explain Germany. Having worked globalized crews side by side, as a boss what i am looking at is the fastest path with the least need to control. case in point - if you have a labor forces that can strike, i cannot make international commitments. Wages are an issue, not the driving issue.

    With today's automation, few products have high labor components.

    Novice re 2 to 3 years employment declines after end of recessions

    this is the first signs of the new normal - where there was an overabundance of the supply of labor. here, however, my response is that the recession end was called too early. i fail to see how any statistical body can say a recession is over when labor is still contracting. the recession begins when labor begins to decline, and ends when employment stops falling.

    the USA is 80% a service economy - and a service economy is based on employment.

    steven hansen



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