Hammered

More of the same . . .

By Jeff Thredgold, CSP
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Table of Contents

The "Underemployed"

Of greater concern was the sharp rise in the “underemployment rate.” This number, which draws more attention now than at any time since its recordkeeping began in 1994, was reported at 13.5% in December, up sharply from November’s 12.6% rate.

This unemployment measure includes people considered unemployed, those discouraged workers who have left the labor force and are no longer counted as unemployed, and those who are working part-time but would prefer full-time hours. This measure will also move higher during the year.

                     No Rosy Scenario

Anyone trying to understand and predict the U.S. economy for a long
time will remember the days of “Rosy Scenario.” The Reagan
Administration was somewhat notorious for providing wildly optimistic
economic and financial forecasts for the next year or two. Such
forecasts had little to no credibility on Wall Street. More realistic
and more credible forecasts began to emerge from Washington, D.C., during
the past 10-15 years.

The recent forecast from the Congressional Budget Office (CBO) was
almost too negative. The CBO projects that the U.S. economy will
contract at a 2.2% real (after inflation) annual rate during 2009. Most
private sector forecasts suggest a lesser decline. The forecast also
sees the U.S. economy leaving recession at mid-year 2009 and expanding
at a modest 1.5% real annual rate during 2010.

The CBO also forecasts that the budget deficit for fiscal year 2009
(which began last October 1) will reach $1.2 trillion, even before any
additional stimulus is requested by the new president, and presumably
approved, in coming weeks. This number, unfortunately, seems accurate.

The CBO also forecasts the unemployment rate will reach 9.2% in early
2010, with average home prices likely to decline another 14% over two
years. The latter number seems a bit too painful when considering the
declines that have already occurred.


Tea Leaf, your guide to understanding today's economy
Hammered continues...
Jobless Jump 
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Real Wage Gains 

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