Since the recession started in December 2007, the American economy has shed 6 million jobs. Unemployment last month rose to a seasonally adjusted rate of 9.2 percent.  According to Mohamed A. El-Erian, CEO and Co-CIO of PIMCO, we are just sleepwalking through our employment crisis.  Reducing unemployment and getting the economy moving will help to ameliorate many of the economic crises facing the United States.  Bill Leary examines the commentary on the nation's unemployment crisis and offers his own point of view.  Bill can be reached via email or at 713.622.1120.

More Bad News

There is more bad news.  Blacks and Hispanics have recorded much higher rates of unemployment in June, 16.2% and 11.6% respectively.

Of those employed, many are underemployed, salaries have been slashed, and workers have been furloughed.    There are thousands of other workers who still have jobs but have had their salaries cut 5 percent, 10 percent or even 20 percent.   In 2002, over 4.2 million workers over 16 had to work 32 hours or less because of economic conditions.  Since 2009, that number has doubled according to monthly measurement by the Department of Labor.

College graduates over 25 have fared better during this recession and their unemployment statistics have been about half of the general population.  Within professional and business services, employment in professional and technical services increased in June adding 24,000 employees. This industry has added 245,000 jobs since March 2010. 

Yet the Gross Domestic Production was showing positive signs coming into 2011.

The Dow Jones Industrial Average neared 14,000 in July 2007, but fell below 7,000 in March 2009.  Most recently, it returned to the 12,500 range. Its strong growth seems out of sync with other U.S. economic indicators.  Perhaps its climb is reflective of  stronger global operations and trillions of liquid assets held here and abroad by U.S.- owned businesses 

The U.S. economy has disappointed most forecasters in the first half of 2011. It grew at an annual rate of just under 2 percent, which is below the average for the last half-century when the U.S. economy grew about 3 percent each year.  Although it may not seem like much, that 1 percentage point makes a big difference — influential analysts are saying we are redefining or accepting our economic and employment woos as normal, or what is being termed the “New Normal.”  The New Normal is a term coined by the brain trust at the giant bond fund PIMCo, and its analysts argue that the U.S. economy could actually grow 2 percent a year without adding any new jobs. That's because the productivity of current workers is rising at about 2 percent a year and without an increase in employment growth is stagnated at the 2 percent level.  According to NPR, a number of economists argue that the estimate of 2 percent growth  is too low.  If the number were, say, 3 percent, employment would fall to 5.5 percent rather than moving up to 12 percent in a 2 percent growth world.  At 3 percent growth, 1.6 million jobs would be created each year.

Rana Foroohar recently observed in Time  that “if the economy grew steadily at, say, 3.9% — which the Fed, in its own moment of irrational exuberance back in February, predicted it might for the year — our national debt (including Social Security and other entitlements) would decline over the next decade from roughly 100% of GDP to a relatively svelte 83%. No more excruciating conversations about cutting Grandma's health benefits or squeezing another five kids into already overcrowded classrooms. If, on the other hand, we grow at 1.8% over the next 10 years, debt rises to 144% of GDP. That makes us Greece.”

Are we seeing a New Normal in the Manufacturing Sector of the economy?  It still shows signs of serious trouble, hovering at 20 percent below what it was in 2002. 

The Private Sector of the U.S. economy shows signs of modest recovery, but it remains well below the 2007 - 2008 levels which reached 107.7.  Growth appears to be driven by growth in the Services Sector, currently at 106.4 and it appears to be approaching its seasonally adjusted 2008 high of 109.6.   A strong driving factor is recovery in the area of business and professional services which has jumped to 111.1 (compared to its 2007 high of 115.8 in 2007).

Get the U.S. Manufacturing Sector back on track will tackle the unemployment issue and help the economy grow faster.  This may mean reinventing our business models, implementing innovative strategies, and committing to U.S. employment. 

Michael Spence, Nobel laureate and author of The Next Convergence, made an interesting observation about one of the factors affecting the U.S. economy.  Spence studied the American companies that created jobs at home from 1990 to 2008, a period of extreme globalization. The companies that did business in global markets, including manufacturers, banks, exporters, energy firms and financial services, accoding to him, they contributed almost nothing to overall American job growth. The firms that did contribute were those operating mostly in the U.S. market, immune to global competition — health care companies, government agencies, retailers and hotels. It is unlikely that these businesses alone will turn our economy around. 

Also, don’t expect that foreign businesses coming to the United States will invigorate our economy in the way U.S. business stimulated theirs.  We created this mess, and we’ll have fix it ourselves.