All Bad News

Unemployment rate for men over 16
from 1978 to 2012 from Bureau of Labor Statistics

Yesterday, as I looked at the news, it seemed, economically speaking, there was a lot of bad news.  Unemployment was up, only 69,000 new jobs were created, they adjusted previous month's rates up, Europe is in crisis, and people seem to be resigned to more bad economic times.

On the graph, you can see just how we have done since 1978.  Why did I choose 1978?  It was when I first entered the job market.  I was graduated from the University of Missouri with a degree in Business.  I remember having friends that graduated a year before me with relatively high GPA's that seemed unable to get a job.  I remember promising myself I would not graduate without a job.  Any job. 

This was just after the Arab oil embargo.  Gas prices, and petroleum in general had spiked.  Detroit was in trouble, both from lack of sales and past poor management (sound familiar?).  Mortgage rates were upward of 12%.  The president was encouraging people to set their thermostats at 68 in the winter and 75 in the summer and be thrifty, drive 50.  And here I was a graduate of a pretty good, but Midwestern school trying to find a job.  Maybe I got lucky, or maybe it was my standards didn't require a dream job, but I was offered and accepted a job with the F.W. Woolworth Co. to be an assistant store manager in their management training program.  It paid $200 per week to start.  After zooming through their program I was offered a store to manage at the rate of $18,000 per year.  But it was a job.  And it turned out to be my life, retail management.

Now study that graph, do you see the trend?  in 1978 fewer that 6 million men were unemployed, at the peek in about 1981 that had jumped to about 12 1/2 million, which is where we are down to in 2012.  So yes it is bad.  However, what can you and I do?

I remember hearing that people could refuse to participate in a recession.  True to a point.  Recessions are great times to buy assets.  Think of housing values, and the stock market.  But what if you have no money?  You can't participate.  I was talking to an old friend the other day.  She had lost the job she had had for over 10 years.  She is 65, so is eligible for Social Security.  Her car broke down, and her mother needs constant care due to dementia.  Social Security pays her about $1000 a month, half of which she needs to pay her mortgage.  I'm sure that wasn't the golden years she anticipated as a younger woman.  She wants a job.  When I talked to her she told me her requirements, her goal right now is to be a receptionist.  She was in sales.  With no assets, she is teetering, ready to fall through the cracks.

Now, let me tell you the secret about economics:  Forget GDP, GNP and the rest of the alphabet, this is what economics is, it is the collective mindset of the masses in the economy.  That is why in Washington, DC which is in the business of Government there is no recession.  People there feel good about the future, so they spend their money accordingly.  Other places in the 'rust belt' people are worried about their future, causing them to hold back on purchases that can be held off on, new cars, appliances and the like, opting to fix their existing assets.  In turn this effects the plants that make those products, causing layoffs, which in turn feeds the feelings of the masses on losing their jobs.  Franklin Roosevelt, I believe understood this mental aspect when he said "We have nothing to fear, except fear itself."  And it is true.  But what if I lose my job?  The terse answer is find another.  Realistically it may not be possible to do what you were doing, or earn the same amount of money.

My wife owns, and I manage a very small retail business.  A few days ago, I had a lady come in looking for a job.  We are still in start up phase, working 7 days a week because we cannot afford employees.  However, I made her this offer.  You can come to work here, anything you sell I will pay you a percentage.  You can set your own schedule and work at your own speed.  Our average sale is around $2000, at 10% that is $200 for each sale.  Three sales a week would make her over $30,000; a sale for every working day of the year would be over $50k.  She politely thanked me and left.  And I understand that not everyone is confident enough in their abilities to work on commission.  One of the reasons we cannot hire is not enough sales.  We would like to open more stores, but lack the money to do so until we get sales.  Solyndra sucked $527 million (that's a half billion) in loans only to go bankrupt.  For 1% of that small companies like ours could expand and hire, three people per store times 5 stores is 15; times the other 99 and that looks like 5000 hires, Solyndra had less than 1200 employees, so which would have been more bang for the buck?  But Solyndra is cool, they are green, they are the future according to the politicos, so we taxpayers lose, not once but multiple times as that money disappears from the economy.

Until Petroleum gets back to a more reasonable level (and don't tell me about Europeans paying $9 a gallon, I don't care), when government realizes they have to live within their means, especially if they want to play the Keynesian game, until our collective feel for things turns positive, the bad news will continue.  Perhaps the President or Mitt Romney will figure it out, like FDR or like Ronald Reagan's "I see America as a shining city on a hill..."  And the graph above starts falling to normal levels.

Spend wisely!