There's a little candle in the dark in the trend of unemployment just reported. But to give it perspective, General Electric recently posted job openings for 90 $13-an-hour positions assembling washing machines at a plant in Louisville, Ky., and received 10,000 online applications. Clearly, 9,910 had to be rejected.
The volume of eager workers is a tsunami. Employers have shed 8.2 million jobs since December of 2007; 5.9 million Americans have been out of work for more than half a year. On top of that, the unemployment rate has risen by 5.1 percent of the workforce in the past 18 months, the largest increase since the Great Depression. The proportion of the workforce out of work for more than 15 weeks is the highest in 60 years. We have lost 6.6 million manufacturing jobs since 2000. We can take a little consolation, but not much, in the fact that the average workweek has increased from 33 to 33.2 hours.
Today, 21 percent of all families have an immediate family member who is unemployed, and 33 percent have an immediate family member or close friend who has lost a job. This affects not only the unemployed but also the family members who depend on them.
Naturally, millions of people fear they are next. Families are already living with a decline in their net worth because home values have dropped by an average of 30 percent and financial assets are worth nothing near what they were. The Wall Street Journal reports that 23 percent of households have mortgages that exceed the value of their homes. That's almost 11 million homes. About half the mortgages are 20 percent higher than the value of the house, and 520,000 homes are already in default. This is an overhang that is bound to put a damper on residential construction, which in the past has been an important source of employment, and that is unlikely to improve anytime soon. In the most recent survey, only 9 percent of families said their income increased this year, the lowest recorded in the 60-year-old survey. And for the first time in the survey's history, the majority of families said they thought their incomes would stay the same or fall.
The nervousness of millions of Americans is entirely justifiable. They see economic head winds all about them. The biggest economy in the world is held hostage by shoppers and consumers who are scared and pessimistic.
What are our job prospects? The problem in the job market going forward is not so much layoffs in the private sector, which are abating, but a lack of hiring. The federal stimulus program is offset by the estimate that there will be a 2010 budget shortfall for states, cities, counties, and school districts in the range of an astonishing $250 billion. Since virtually all states and cities have to run balanced budgets, the result will be reduced services, layoffs, and tax hikes. As Harold Meyerson points out in the Washington Post, this will reduce net government spending to boost the economy to approximately 1 percent of gross domestic product, thus diminishing the effectiveness of the government's efforts to combat the recession.And there is a major credit crunch constraining consumer spending and squeezing small businesses. There is virtually a total freeze in credit for small businesses. This is particularly ominous because small start-ups provide most of the economy's new jobs. If these businesses can't keep credit lines open, those jobs simply disappear. All this is reflected in cutbacks in the number of credit cards, credit lines, and loans from small banks. Meanwhile, the number of personal credit cards for consumers is down by 150 million, and personal credit lines have been reduced by $500 billion, from $1.3 trillion to $800 billion. This trend is expected to continue. Consumer spending is off 12 percent per shopping trip. Consumers are simply not buying expensive goods; they hunt for bargains. This in turn is punishing for many small businesses with small margins.
Medium-size businesses are constrained by the risk-analysis lending of the financial world, which prefers to lend to large businesses that are deemed more creditworthy. But while these big businesses have access to financing, they are holding back in hiring because of anxiety over the Obama administration's policies on such matters as increased healthcare costs, higher taxes, more corporate regulations, and disaffecting labor policies.
Corrected on 12/07/09: An earlier version of this commentary misstated the year for which a budget shortfall is expected for states, cities, counties, and school districts. That shortfall is expected for 2010.