The Big Government Divergence

Posted By on February 25, 2010

The divergence has accelerated as the recession has deepened!

US Government Employment

Unfortunately, the employment trends depicted in the nearby chart are not the trends that typically produce national prosperity. If government employment were to continue rising while private sector employment fell, the economy would become less productive…at least that would be our guess. (Picture the post office operating every McDonald’s in the land).

Thus, the recession may be ending for Wall Street economists and government workers, but not for anyone else. Adult male workers, to name just one conspicuously under-employed group of Americans, are hurting big-time…

US Male Unemployment

“Male employment (aged 25 to 54 years old) plunged 114,000 in January and is back to levels last seen in June 1996,” observes David A. Rosenberg, an economist who toils neither for Wall Street nor Washington. “Almost 10% of what was once considered the ‘breadwinner’ part of the workforce has been extinguished during this recession. How could anyone realistically be excited about recovery prospects knowing this?”

Furthermore, Rosenberg notes, “the average duration of unemployment rose to a record 30.2 weeks from 29.1 weeks in December; and for the first time ever, we have more than 6.3 million Americans (up from 6.1 million in December) who have been looking for a job with no luck for at least six months. That is an unprecedented 41.2% share of the pool of unemployment… The level of unemployment today, at 129.5 million, is the exact same level it was in 1999.”

Not surprisingly, therefore, your average American laborer is noticeably less optimistic than your average Wall Street economist. The Conference Board’s Consumer Confidence Index plummeted from 56.5 in January to 46 this month. Even more telling, the “present conditions” component of the index dropped more than 20% from January, to its lowest reading since 1983. At the same time, the “business is good” component of the index dropped to its lowest reading in the 43-year history of the Consumer Confidence Index.

US Consumer Confidence

If these are the signs of recovery, it is a very strange recovery indeed.

Eric Fry…

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