Without Jobs, Where Are We?

Consumer confidence has slipped in the past month to levels not seen since early March, before the major stock market rally. Housing and sales data have pushed the confidence index down, but the big key right now to American consumer confidence is the job market. Job losses have kept coming as the Obama Administration and other key players in the economic and government sectors have all said that the economy is recovering. Perhaps it is slowly recovering on Wall Street, but Main Street is left wondering when they will begin to see signs of real improvement in the form of decreased unemployment and real multiple-sector job growth.

Without new employment opportunities the US economy is in danger of real stagnation. Many economists talk of stagflation, a scenario in which the economy is stagnant but prices for consumer goods begin to inflate beyond the tolerance of most people’s budgets. Employment stagnation, in my opinion, is a far greater danger and a far bigger contributor to the economic stagnation that is still being felt.

The official unemployment rate is right around 10%. But the really troubling fact is that over the past 75 years, unemployment and the way it is officially measured has changed in many ways. These changes help to show unemployment data in a more positive light, no matter what the real situation is for Main Street. So given that the current official unemployment rate right now is 10% or close to it, it more likely reflects a real unemployment rate of 20% or higher. By changing the way we measure unemployment, we are changing the way that these data are received and perceived by the general public.

Anyone with the knowledge that the way we measure unemployment has changed immensely from the way it was measured during the Great Depression and even 20 years ago, realizes that the perception of the real unemployment situation is vastly more important than the real numbers. During the great depression, for example, the official unemployment rate was 25%. Ever since then there has been a concerted effort by the US Government and its bean counters to adjust their statistics to reflect a rosier-than-reality picture. This projection has caused a skewing of the real numbers, but has also helped, in many situations; to boost consumer confidence any time there has been a recession or recession-related worries on Main Street.

The average Joe sees the unemployment rate at around 10%, but after looking around with his own eyes, sees far more unemployed and underemployed people than were accounted for by the US Government. The real key to economic recovery is jobs and job creation, no matter what sector. As long as job creation is once again seen on the horizon as a real possibility, people will have some level of confidence. But since the consumer confidence has dropped in June, there likely exists a strong dichotomy between what people are seeing on the streets and what they are hearing from the Government and its statisticians. No more rosy economic picture here, and it’s becoming more and more apparent that it’s getting much harder to hide the real data from the public for very much longer.