The Beginning of the End or the End of the Beginning?

It was announced today that the US economy lost another 345,000 jobs in May, driving the unemployment rate to 9.4% from 8.9% the month before. Hallelujah! So *just* 6 million jobs have been lost since the beginning of this recession, which is now approaching its 18th month. The jobless rate is at a 25-year high and the highest since it registered 9.5% in August of 1983. Ahhh, the summer of ’83 - those were the days. But I digress…

Looking further back before the summer of 1983, the unemployment rate also hit 9.4% in May of 1982 on its way up to a post World War 2 high of 10.8% in November and December of 1982. The economy by the summer of ’83 had begun showing some signs of life and the resulting effect to the unemployment rate was that it slowly improved from the beginning of 1983 but yet still didn’t drop below 7% for two consecutive months until November of 1986. Definitions vary, but ‘full employment’ generally is defined as an economy with an unemployment rate of below 7%.

Meanwhile trouble continues to brew on the horizon. It’s awfully hard to imagine any kind of recovery scenario when states are facing enormous budget deficits, consumer and business credit is difficult to come by, unemployment is still rising, interest rates have nowhere to go but up, residential and commercial real estate values continue to slide, the dollar is weakening and consumers are finally starting to get the message en masse that it’s important to spend less and save more of their hard-earned income than they grew accustomed to during the crazy buildup to where we are today.

There’s no way we’re close to the end of this economic down cycle yet.