[nobodypanic]

i don't have a degree in economics. my higher academic background is in philosophy and mathematics, so cut me a little slack here.

can anyone explain to me how employment is a lagging indicator in an economy w/so many out of work that is predicated on consumer spending? once unemployment exceeds some critical threshold, wouldn't the fact that ~70% of this economy depends on consumer spending actually imply the converse, that employment is, in fact, a leading indicator?

i toss this out here for peer review.

shoot it full of holes if you can; i won't mind. my only interest is wrapping my mind around things better.

[Leanan]

Employers are reluctant to fire and to hire. They don't want to lose good talent, and they don't want to take away people's means of support unless it's absolutely necessary. So even after the economy starts going south, it takes awhile before the layoffs reflect that.

And when the economy improves, businesses are slow to hire. They don't want to shell out for new workers until they're sure the recession is over.

[AirlinePilot]

Something key to remember with unemployment though is that If and when things get bad enough, ala depression, unemployment becomes a predictor or leading indicator.

We may actually see that with what is going on. The greater the number becomes causes problems to be magnified and directly affect the economic indicators and it isnt in the positive direction. With the depression of the 30's this is what happened for part of it. It birthed the CCC and the WPA. Think how well that might work in these times????

[Novus]

$this->bbcode_second_pass_quote('Leanan', 'E')mployers are reluctant to fire and to hire. They don't want to lose good talent, and they don't want to take away people's means of support unless it's absolutely necessary. So even after the economy starts going south, it takes awhile before the layoffs reflect that.

And when the economy improves, businesses are slow to hire. They don't want to shell out for new workers until they're sure the recession is over.

[sameu]

I'm neither an economist but this dual explanation makes sense
and since we're not in a recession but a system failure (system = growth = cheap oil = fail) i'm guessing this is in fact more a leading indicator then a lagging

[AirlinePilot]

I think whats happening is we are finally seeing the results of what has been going on systemically. The feedback loop has become positive when it comes to unemployment and retail sales, tax receipts, Govt debt, and mortgage problems. It was only a matter of time and now the big unknown will be how bad does it get? My guess is that the government is only partially standing in the way and it cannot do this indefinitely. At some point the floodgates open and we go for the real bottom.

Unemployment hits 20-25%, S&P goes to 3-400, and the Dow falls to about half of where it is now. That will be the bottom. Unless there is divine intervention things could easily get that bad. If you told me this before springtime last year I would have put you in solid tinfoil territory. Now last years tinfoil is this years reality. Ugh.

[Tyler_JC]

Companies will start buying software, equipment, machines, etc. once they expect business conditions to improve in the future. It's all about future expectations.

Watch capital investment. If we see a rebound in business investment, we can start calling the end to the recession.

Unfortunately, in the first quarter, real nonresidential fixed investment decreased 37.9 percent. That's bad.

Wait for a positive figure.

You can only figure these things out in the rear view matter.

Unemployment has always tended to lag the end of the recession.



In more recent times, the lag has gotten worse because the basis of our economy has changed. Unemployed factory workers used to be put right back on the assembly lines once ordered picked up. Now we try to squeeze more and more out of the same number of people. Thank you Globalization.

[vision-master]

$this->bbcode_second_pass_quote('', 'C')ompanies will start buying software, equipment, machines, etc. once they expect business conditions to improve in the future. It's all about future expectations.

[shortonoil]

Novus said:

$this->bbcode_second_pass_quote('', 'W')e are now in the 19th month of this official recession. In the first half of the recession the US lost 1 million jobs but in the second half another 5 million jobs were lost.

[patience]

Hey short,

What does that "OH Sh-t Moment" mean? Is it the end of US govt solvency you talked about?

[shortonoil]

$this->bbcode_second_pass_quote('', 'H')ey short,

What does that "OH Sh-t Moment" mean? Is it the end of US govt solvency you talked about?

[patience]

Six months, huh? Wow. I hate to think what that means to the average Joe/Jane. I think it would be better for all if it came as a slow dawning of awareness, than, say, some tipping point event that galvanizes everyone.

[rockdoc123]

I believe there is something different happening in this particular recession. From what I've been able to see a lot of companies started laying off well before there was any signs that they were going to even come close to "being on the ropes". I think many of them have learned that if you wait too long then it is too late. As a consequence when the market started to fall there was a very quick start to layoffs whereas in the past that has taken sometime.

In all past recessions the market steamed off into recovery while jobs were still being lost, market recovery always seems to lead it. This time around there might be a different philosophy. It was less than a year ago when it was difficult to find people to hire, especially so in the oil industry. A case in point is the oil sands areas around Fort McMurray where the local McDonalds had to close because there was no one to hire...they had all taken some sort of job in the oil fields. You would think that some of the industries that had trouble attracting staff in the boom might be worried about what will happen if it is a rapid recovery and hence might jump the gun this time around and try to attract staff while they can.

Time will tell.

[KaiserCesar06]

In addition to what was mentioned above, during the recession a lot of people are underemployed or working part-time and may be the first to receive the benefits of a recovery, however their employment status for recording the unemployment rate doesn't change.

This whole theory is a bit indicative of the fixation on GDP in my mind. We seem to imply that GDP is the measure of the strength of the economy, and say that 10% of people being without income is not really saying anything about the true strength. While a strong GDP has led to higher employment and wages in recent human history, I see this as an illustration of the further ignorance of equity problems. I'm thinking in this downturn we won't see a full recovery and inequality will end up widening.

[MarkJ]

During slower periods, utilization of our existing laborers, equipment, tools or technology is low enough that our businesses could pick up substantially more work without having to rehire and/or hire additional employees. We generally have our existing employees working a lot of overtime before we hire and/or train additional employees. We often won't hire additional help until we have many months of backlog, many future jobs/projects booked and/or future potential work/sales in the pipeline.

When business picks up, many new hires are full-time, part-time, seasonal, temporary or second job seekers not drawing unemployment like teens, college students, semi-retired workers or people that don't have to work looking for additional spending money. Many job seekers are also currently employed and/or already have more than one job. Many private sector jobs are also filled by underground economy workers, many of which also draw unemployment while working under-the-table jobs, side jobs etc.

Many of the very highly productive job seekers that already have a job can also replace two or three less productive unemployed job seekers, so there's no need to hire additional help.

Unemployment benefits, multiple emergency unemployment extensions and social programs like cash assistance, food stamps, WIC, subsidized public/private housing, HEAP, Emergency HEAP, transportation assistance etc effectively help keep people on unemployment when they would normally be forced to work.

Job seekers that have been drawing unemployment benefits for such a long time often gain weight, they're out-of-shape and their skills aren't as sharp. From the perspective of employers, it also doesn't look good when job applicants haven't worked for so long.

[MarkJ]

Another issue we see in many high unemployment regions with a high percentage of uneducated, unskilled, inexperienced workers is that job qualifications have changed substantially. Many of the job seekers can't find work since they don't have a high school diploma, driver's license and can't pass a drug screening and criminal background check.

Since much of our job growth is in the suburban areas, these jobs are often inaccessible to people without a driver's license and reliable transportation.

[shortonoil]

patience said:

$this->bbcode_second_pass_quote('', 'S')ix months, huh? Wow. I hate to think what that means to the average Joe/Jane. I think it would be better for all if it came as a slow dawning of awareness, than, say, some tipping point event that galvanizes everyone.