Has the Permabear's favorite employment statistic already peaked?
My previous post stating that the United States might return to job creation in April of next year certainly generated quite a bit of discussion. So I am going to up the ante further with the following statement:
The permabear's favorite employment statistic, U6 aka "Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers" may have already peaked.
Unlike the more widely publicized unemployment rate which has continued to rise, U6 actually seems to have peaked at 16.8% in June of this year. It has since fallen to 16.5%. It certainly is not rising at the astronomical rate that many of the negative nancies imply in their constant wave of doom and gloom posts.
How is it possible for U6 to have peaked when the main unemployment rate is still rising you ask? Well, I'll tell you (even if you didn't ask ;) ). Remember that the U6 statistic includes people who are "employed part time for economic reasons." The first thing that companies do when the economy begins to recover isn't run out to employment agencies to try to find new employees. Instead they increase their labor input by bringing part-time workers back on full-time. This may be what we are seeing happening right now. The record number of people working part-time when they would rather be working full-time has stabilized and is slowly beginning to fall.
The fact that part-time workers are being called back to full-time work may be a leading indicator that a peak in the main unemployment number is just around the corner and a sign that the economy is improving, albeit slowly.
I realize that saying something relatively positive like this here in CAPS is as a fellow CAPS player rofgile hilariously put it the equivalent to "throwing sunlight upon a vampire crypt!" but I just call 'em like I see 'em. As anyone who has read some of my previous posts can attest, I am hardly wildly bullish on the U.S. economy.
I suspect that the level of unemployment that many have come to regard as "normal" over the past several decades will prove to be anything but. The new "normal" unemployment rate may end up being closer to 7% in the future...which is hardly a pleasant prospect. Many of the jobs that we have lost, such as those that are related to housing (i.e. mortgages, construction, etc...) may be gone for good. There was a housing bubble there and no amount of magic from the government is going to be able to completely reflate it.
On a related note, want to know how to figure out if something is a bubble? My brother clued me in on this one. It's called the stupidest friend from high school indicator. When the stupidest person that you knew back in high school is making huge bucks, we're talking well into the six figures here, in an industry...chances are it is a bubble that will eventually implode. I digress.
I think that the recovery will be slow and that we will experience much slower growth than we have become accustomed to for years to come. This is why I have been purchasing mostly dividend paying stocks and interest paying bonds for my portfolio. Still, make no mistake about it, the economy will eventually stabilize and begin to recover.
Source: Table A-12. Alternative measures of labor underutilization