The news is even worse than I had expected, as U-6 jumped almost a full point today.
Link to BLS
The unemployment rate is out today and it continues to rise at an accelerating pace. This is not good news for the economy or for American’s in general. The rise in unemployment is going to essentially prevent Obama’s housing plan from ever really having a shot at working, since the newly unemployed will likely face foreclosure and will not qualify (due to a lack of income) for any of the refinancing programs under the housing plan. The rising unemployment rate is also going to put a big damper on the stimulus package, as continued job losses will likely offset any job creation that the stimulus would foster and a retrenchment by the consumer into a more historical pattern of savings vs consumption means that any jobs created will likely have negligible impact (when compared to the models) because consumers are choosing to save at a rate that the models do not account for. This will lead to further job losses and economic pain until the consumer is able to rebuild their balance sheet and create a confidence boosting emergency fund.
Finally, the key to the data released today is the difference between U-3 and U-6, as the high U-6 number almost guarantees that U-3 will remain elevated well into any recovery, as those discouraged workers again join the ranks of job searchers (thus inflating U-3, while deflating U-6). That, coupled with structural economic effects of this recession (ie more technology in the workplace and the likelihood that many of these finance jobs are not coming back soon) means that we may be looking at high unemployment through the next presidential election.
The unemployment rate (U-3) is now the highest since 1983 (which was recovering from the 1981-82 recession) and is showing no signs of abating.