Monday, June 22, 2009

The Surrealistic Quality of the Recovery....

"It's surreal out here," said a soccer dad to my husband at our village fair this weekend. The soccer dad works in print advertising, so you can imagine the surreality of his existence. He had to lay off seven people last week - and is concerned about the longevity of his own position.

One neighbor we know just laid off two people in his department. It sickened him to do so - he himself had been a victim of downsizing a few years ago and knows how it wreaks havoc on the soul, the psyche and the bankbook.

A Cub Scout dad we know used Facebook to post his "success story" in temporarily keeping his job, which was to be terminated right around the end of the school year. His corporation, despite the leadership of a man now being paid more than $10 mil a year, is on very shaky ground and may not be around much longer.

Downstate, things aren't much better.

A neighbor of my in-laws, a developer, is in bankruptcy right now. Another person they know confessed he'll likely be "terminated" soon from his job at a training company. Training people to excel on the job is an unaffordable luxury for many companies in this environment.

A story in today's Washington Post expresses many of the concerns felt by millions outside of Washington and Wall Street:

"Since the recession took hold in December 2007, the U.S. economy has lost 5.7 million jobs, a rapid decline that caught administration and other economists off guard. In recent months, the velocity of job losses has slowed substantially, which, combined with a rising stock market and increases in consumer spending, has offered hope that a recovery is beginning to take hold.

But employers still cut 345,000 jobs last month, while the nation's growing working-age population requires the job market to expand by 125,000 to 150,000 a month just to keep the unemployment rate stable.

The dynamics of the modern economy further dim the employment picture. Job growth was weak for years after the past two recessions, in 1991 and 2001. Employers have grown increasingly slow to rehire workers, and steady advances in technology have allowed businesses to do more with fewer workers."

Right now, the unemployment rate is 9.4 percent, and has surpassed the "adverse scenario" used in the Fed's stress tests.

What does this mean for our heralded recovery? Will banks deemed healthy when unemployment was estimated at 8.8 percent remain healthy with unemployment inching closer to 10 percent? Doubt it. I doubt it.

The startling unemployment figures do not bring confidence to consumers. And as everyone knows, the illusion of confidence is as important as confidence itself. With an economy that relies heavily on consumer spending (70 percent!), the surreality of the nation's unemployment is a very grave threat to the recovery.

No comments: