Unemployment Hits 10.2%November 7th, 2009 by Lee Eldridge
A friend of mine predicted early this year that unemployment would hit 10%. I didn’t believe him. Props to Billy. Unemployment is now at its highest rate since 1983.
We would have hit this number earlier, but with the last round of unemployment figures, the government removed many of the unemployed from the list. When people become unemployed long enough, many of them stop looking for work. Once you stop looking for work, you no longer count as “unemployed”. And these numbers don’t take into account the “under” employed — people who have accepted part-time work, and jobs at significantly reduced salaries. So in other words, it’s worse than it looks.
While unemployment is bad, it’s important to understand that it’s a trailing indicator. As the economy starts to go bad, employers hang on to staff as long as possible. Revenues drop faster than employment. But eventually, if things are bad enough, employers have to reduce staff to stay in business. I believe that most employers, small business owners in particular, are optimists at heart. They’d rather make other cuts than reduce staff if at all possible.
As the economy eventually rebounds, employers are often slow to start the hiring process again. If they’ve managed to stay in business, they’re likely still recovering financially. They have to play catchup, and make sure that the economy appears positioned for continued growth before committing to hiring new employees. With the length and depth of this recession, small business owners appear to be somewhat shell-shocked. It may take a while for them to feel good enough to start expanding payroll again.
The important question is this: Is the economy improving?
Many economists, including Moody’s, are declaring the recession to be over. I hope they’re right. But expect a bumpy recovery.