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In April of 2001, I lost my job in the "dot-bomb" recession.  I was living in Silicon Valley and had had a few "silicon valley" type jobs (read:  I worked for technology companies), the most recent - at that time - was a start-up.  Due to the economic conditions worsening, my little startup lost its funding.  Instead of working for free, every employee decided to simply stop working there.  The company didn't really close, as much as it faded away through attrition.  A few weeks later, my son was scheduled to be born via a c-section.  But the company wasn't paying its health care premium which meant that I couldn't get COBRA coverage.  My wife's pregnancy was considered a pre-existing condition.  As such, we could get family health insurance, but it wouldn't cover the cost of the surgery my wife was going to have.  Luckily for us, our synagogue put us on their health care plan (we reimbursed them their costs) and we got coverage the night before the delivery.  

From April of 2001 to July of 2002, I was out of work.  We lost our house.  And in spite of having a fairly good resume and proper pedigree, I simply couldn't find work.  Jobs had simply vanished.  I remember one job interview where I was sitting at a table talking to the hiring manager, when the HR representative interrupted my interview to tell me the job requistion had been closed.  That was my final insult.  I decided to change careers.  So in July of 2002, I joined a Wall Street firm and became a "Financial Advisor" where, among other important things, I essentially manage other people's investments.  

One of the things that makes me good at my job is genuine empathy.  I still live in Silicon Valley and people around here are effected by economic doldrums -- just like the rest of the country (although we've certainly recovered faster than most).  When one of my clients lose a job, I help them recraft their resume and use my network to help them land on their feet again.   But as a Financial Advisor, I am asked frequently are things getting better, and where is the proof.  So I thought I'd submit this diary to present you with the graphs illustrating why and how things are improving.  I make no claims that if you are still unemployed that things are better ... for you.  But a rising tide lifts all boats.  Hopefully you will find your bliss sometime soon.  Follow me below the fleur de kos for the data and a bit of narrative.  I hope you find some reasons to be optimistic.

An explanation about the clarity of the graphs:  I'm sorry.  I don't have the proper software tools to cut and paste perfectly.  I've tried, in the text, to highlight anything super important.  The main emphasis, however, is the trend or direction of the graphs.

Gross Domestic Product:  A sputtering but resilient economy.  Yes, we've been growing, but slowly.

Source: BEA
The economy is like a gardener's worst nightmare:  a weed they can't kill.  No matter how many times it gets sprayed or stomped on, it grows back.  Despite headwinds in Europe or a slowing China, the economy has grown in 12 consecutive quarters.  While many dismiss the growth as anemic, it is extraordinarily resilient. Imagine what is possible when uncertainty diminishes!

The yellow text says "$685 bn of lost output" and "$850 bn of output recovered.

This chart gives a clue about why the growth has been very slow.  Over 70% of the US GDP is due to personal consumption.  In order for the economy to grow, consumers cannot be saving money.

Savings vs Debt

Source:  BEA, Federal Reserve
American consumers will not be permanently cautious.  This could provide a boost for the economy down the road.

Unemployment and Employment

Source: BLS, FactSet
Above:  Unemployment Rate.  Below: Employment numbers.
The labor market continues to recover (Q2'12 saw the pace slow).  Some of the slowdown is the result of fewer people seeking employment.  Stronger GDP growth will be necessary to bring down the unemployment rate further.  A good rule of thumb would be that 1.5% of GDP growth is needed to see sustained payroll growth, but nearly 3% GDP growth would be needed to bring down the unemployment rate.
Source: BLS, FactSet

Unemployment by Eduction

Source: BLS, FactSet
Although it hasn't been a particularly robust jobs market, for those with an education, it hasn't been as rough.  For those with a college degree or greater, the unmployment rate is under 4%.  For those without a college degree, the number more than doubles.  To see how income is effected, see the graph below.
Source: Census Bureau


Source: National Association of Realtors, S&P, FHFA, FactSet
Source: Census Bureau

Housing was the root of the recession that began in 2008 and it has much to do with the pace of recovery since.  Lately, home prices have not only shown signs of stability, but in many markets, prices have actually inched higher.  Don't even get me started on housing prices in Silicon Valley where I live.  It's like the recession never happened over here. Thank you Apple, Google, and Facebook!

While far too early to make a prediction it is safe to say that IF prices were to continue on this trajectory (higher, slowly), it would go a long way towards kick-starting the much needed positive feedback loop in the U.S. economy.  Positive feedback loop could mean higher home prices result in increased homeowners equity and higher confidence.  This in turn could result in more economic activity (consumer spending, household construction, etc.) and stronger corporate profits or improvement in jobs.  

What isn't helping:  Federal Outlays vs Federal Revenues

Source:  US Treasury, BEA, CBO
This gap has to close.  It's still far too wide, by historical averages and nearly any way you look at it.  Policy matters.  Vote Democratic to "close the gap."  Enough said.

and lastly....
The Market By Party

Source: Gallup, FactSet
I love this graph.  I hope you do too.  It says "Stock market returns by political party control based on election dates, parties identified as President/Senate/House"
Because the stockmarket, going back to 1940, does better when the White House is occupied by a Democrat.   So if you're concerned at all about your 401(k), make sure you allocate your investments by the makeup of our government!

All graphs courtesy JP Morgan Asset Management.

Originally posted to BayAreaKen on Wed Sep 05, 2012 at 01:24 PM PDT.

Also republished by Community Spotlight.


Charts are great, you *feel* better off

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