Everybody must have been happy yesterday, because the Dow rose 217 points, to the highest level in 3 months.
The Republicans were happy because they could lament the fact that unemployment rose from 8.2% to 8.3% More significantly, the combination of unemployed plus under-employed (called the U-6 rate) rose to a scary 15%. The Democrats were happy because 163 thousand jobs were created, far more than the 100 thousand jobs that were expected, albeit far fewer than the 250 thousand jobs needed each month.
But, that rate of job recovery following a recession is an interesting question. Everybody knows this has been a slow recovery. Now, take a look at this graph:
The blue dotted line shows the average rate of job recovery from recessions from 1954 to 2000. The gold dotted line shows the rate of recovery from 2000 recession, which was minor by historical standards. Lastly, the red line shows the current recovery rate in this recession.
There is no mistaking that the current recovery is S-L-O-W . . . but it is actually a tad better than the last recovery. Generally speaking, recovery from a financial crisis does take longer than an ordinary recession, but that doesn’t explain the similarity to the last recovery, which was indeed an ordinary recession. (Don’t you remember all the criticism President George W. Bush received about “the jobless recovery?”)
One other number really struck me in yesterday’s report: 3.5 million jobs are available in manufacturing but remain unfilled . . . because of a “mis-match in skill levels.” With over 14 million people either unemployed or under-employed, we cannot seem to find 3.5 million with the right skills. There is something else holding back job creation, besides the fact we are recovering from a financial crisis. Could it be that, in this post-computer revolution era, it will always take longer to recover the jobs lost — because job skills are changing so rapidly from manual-to-computer-based-to-robotics??
In addition, is something happening in our manufacturing base that we need so many more workers? Take a look at our “capacity utilization” or how much our factories are working, which looks like this:
This chart tells us that our factories are approaching 80% utilization, which is considered near-full capacity. Above that level, cost-push inflation usually appears. Now, imagine how that red line would perk up if we were suddenly able to fill those 3.5 million job openings in manufacturing.
That is just one reason why I believe our economy, the U.S. economy, is spring-loaded to grow once we get the two wet blankets known as Europe and the Election off of us.
Europe could easily produce another financial crisis at any time, and the Election could determine whether we go over the Fiscal Cliff, which could easily produce a fiscal crisis like we have never seen.
It is a time for politicians on both continents to be heroic . . . but not investors.
It is time for the unemployed to borrow money from their families to get re-trained and then re-locate away from those families to wherever the jobs are. (It sounds so easy when you don’t need a job, doesn’t it?)