Economy Won't Recover in 2010
The two charts below give some idea of how very bad the current state of the U.S. labor market is.
The first chart shows that while the headline US unemployment rate has risen from around 5 percent at the start of the current recession to its present level of 9.8 percent, the U-6 measure of unemployment, which includes marginally attached and involuntary part time workers in the unemployment measure, has increased from under 9 percent at the start of the cycle to over 16 ½ percent at present.
The second chart shows that the run-up in involuntary part-time work this recession is the worst in the post-war period and is materially worse than it was in the severe 1981/82 recession. A very large amount of involuntary part time workers suggests that companies will be very slow to hire new workers as the economy starts to recover but instead they will increase hours worked by those already employed.
These charts increase my conviction that it is highly improbable that we can get a meaningful economic recovery in 2010 since these large labor market gaps will put considerable downward pressure on wage growth. I also remain convinced that by November 2010 the headline unemployment figure will remain above 10 percent.
