The Unbearable Truth about this Bubble Age...

Where have all the jobs gone
long time passing ♫ ♫♪ ♫ ♪
Where have all the jobs gone
long time ago
Where have all the jobs gone
Gone to graveyards everyone ♫ ♫ ♪ ♫ ♪
When will they ever return
Oh when will they ever return
♫ ♫♪ ♫ ♪
Sung to the tune of ‘Where Have All the Flowers Gone’.

“Many lost jobs in the US will never come back... ” says the Wall Street Journal.

Need we explain why? Because they’re not lost, waiting to be rediscovered. They’re not missing in action, only to be repatriated after the fighting stops. Instead,

They’re dead. Gone forever.

There have been 7.2 million jobs lost since recession began. Many of these jobs were Bubble Age jobs . Millions of people, for example, earned their money in ‘housing’. They were putting up houses in the sand states... or building granite countertops... or selling, flipping or financing the houses.

Those jobs are gone forever.

Never again in our lifetimes are we likely to see such an explosion in the housing industry. Sure, people will still build houses... and do all the other work involved in the traditional housing industry. But it will be only a fraction of the industry it was in the 2002-2007 period.

There were also all the jobs involved in selling things to people who didn’t need them and couldn’t afford them. Labour was needed at every step along the way – manufacturing (perhaps in China), shipping, stocking, retailing, fixing, and financing the stuff.

And don’t forget all that mall space... and all the trucks... and all the other things that supported the over-consumption of the Bubble Age.

And now the Bubble Age is over. It will not come back, no matter how much cash and credit the feds pump into the system. (Not that they can’t make things worse... with a BIGGER bubble... but that is not yet in sight.)

In the Wall Street Journal yesterday was an item about Las Vegas. The casinos are folding up their expansion plans, it says.

But the big news yesterday was that the service industries are growing again... at least that’s what the latest figures show. This news so delighted investors that they bid up Dow stocks 112 points. Oil rose above $70. Gold posted a $13 gain.

Don’t get too excited about that rise in the service sector. Everything bounces... even dead jobs. Dead jobs bounce; they still don’t get up.

After months of decline, it may be true that the service industries have had a rebound, but don’t expect them to begin recovering the stamina and strength of the bubble years. A few more people may have gotten jobs serving drinks in Detroit’s bars last month, but it is not likely to turn into a durable recovery of the job market.

In the 1990s, the US economy added 2.15 million new jobs every year. It needed to add at least 1.5 million or so just to remain at full employment – that is, with about 5% of the workforce unemployed at any time.

To put that number in perspective, this year the economy has LOST 2.5 million jobs – and that’s just in the last six months. Those jobs aren’t coming back.

As we keep saying, this is a depression. It is a major correction, in which the economy needs to find new jobs... because it can’t continue to do what it has been doing.

New jobs are typically created by new businesses – small businesses that are growing. Big businesses already have all the market share they’re going to get. They also typically have all the employees they need. Then, when hard times come they discover that they don’t need all that they have, so they cut back.

Job cuts from large businesses is what you expect in a recession. But this time it is different. This time, big businesses have let people go by the million. But small business has not been hiring them either. So not only is unemployment growing... the trend shows no signs of coming to an end.

Economists are reconciled to high unemployment levels for a long time. The head of the IMF says unemployment may peak in 8 to 12 months. Even if that were true, it will be a very long time before the job market recovers.

Just do the maths.

We’ll keep it simple. The economy needs, say, 1.5 million new jobs per year. Instead, over the last two years, it’s lost 7.5 million. Now, it has to stop losing jobs... let’s just say that happens a year from now. By then, the total of jobs lost may be near ten million. Plus, there are the new jobs it needed – but never got –over that three-year period. That’s another 4.5 million.

So, the total will be about 14.5 million jobs down.

Then, let us say, because we are in a generous and optimistic mood, that the economy then begins creating jobs again... at the rate it did during the ‘90s. What ho! After five years, that still leaves the economy more than ten million jobs short, doesn’t it?

In order to get back to full employment, the economy has to surprise us on the upside. It has not merely to return to the growth levels of the ‘90s... it has to surpass them. It needs to grow so fast that it creates three million jobs per year. And even then, it would take nearly ten years to get back to full employment.

Pretty grim, huh?

Well, don’t worry about it. It won’t be like that. It will be worse.


Bill Bonner
The Daily Reckoning