It’s about Jobs, Stupid!

The employment picture remains lousy to put it mildly. Where are the job openings? Corporations are still cutting jobs or sending them overseas. How many of the millions of jobs that were lost will ever return? So far this year, the U.S. lost 3.7 million private sector jobs. Even during the last economic expansion, after the dot-com bust, private job creation was conspicuous by its absence (negative 1,068,000 so far during this decade) as compared with the previous three decades where job creation averaged 17,000,000. See the following table, compliment of the Contrary Investor.

Note: To enlarge the table, double-click inside of it.

You can see that from the 1970’s through the 1990’s, the U.S. private sector created a lot of jobs. The numbers for the current decade through July 2009 is a negative 1 million plus. Keep-in-mind that this has been the first decade in the last four where the U.S. private sector has not created on job!

In Barron’s “Up and Down Wall Street” for the week of August 17, 2009, “Fred Hickey points out that information-technology jobs have scarcely proved immune to this recession (the unemployment rate in Silicon Valley is something like 11.8%), extending a decade-long trend. In that stretch, around 500,000 high-tech jobs joined the five million manufacturing slots that have gone overseas, lured in no small part by cheap labor.” By way of illustration, more than 70% of IBM’s workforce is now offshore.

Folks, these jobs are not coming back, which is not good for sustainable growth in GDP going into 2010 and beyond. Yes, we will probably see real GDP growth for the third quarter for statistical reasons, as discussed in my post entitled “Stock Market Exuberance,” dated Friday, July 24, 2009. In addition, without job growth, commercial and residential real estate is dead in the water. A recent report by Deutsche Bank, entitled "Drowning in Debt," estimates that within two years, home loans that are underwater, which are now 26% of the roughly 51.6 million residential mortgages, will rise to an astonishing 48%! In other words, one out of every two homes in America will be worth less than what is owed on the home. This is definitely not going to be a confidence booster to the American consumer.

I firmly believe that the job numbers, or lack thereof, is the key to our GDP recovery ahead. And for now, as far as the labor markets are concerned, there is absolutely no private sector job recovery. Thus, no sustainable economic growth lies ahead without job growth.