The Eternal Depression

Oct 2009. Bill Bonner. DailyReckoning.

Yesterday, we were calculating how long it would take to get the jobless number back down to ’90s levels…that is, around 5%.

There are now about 131 million jobs in the United States…and about 15 million people who would like a job but can’t find one.

Meanwhile, population growth adds about 1.5 million new workers every year.That means the economy has to grow at 1% (in real terms) just to stay even with population growth.

Currently, the economy is going in the wrong direction – backwards. It’s losing jobs…maybe 3 million this year…and maybe another 2 million or so before it finally stabilizes (who knows?)…for a total of 20 million jobs down (about 13% unemployment) by the time unemployment bottoms out.

Let’s suppose, by some miracle, the economy turns around…and begins growing at 3% per year. That should be about 3 million new jobs per year. Half of those, remember, are just to keep up with population growth. So the other half – 1.5 million – gradually reduce unemployment. Now, let’s get out the calculator…20 million divided by 1.5 million equals a little more than 13.

By these numbers you can expect full employment again in 2022!

But what if the economy doesn’t grow at 3% per year?

Ooooh…that’s the problem, isn’t it? All the feds – and practically all other economists too – are projecting a return to normal. They expect a ‘recovery.’ But what if there never is a recovery?

Economy Falling Years Behind Full Speed

April 6, 2009. Louis Uchitelle. New York Times.

As the recession grinds on, more and more of the nation’s means of production — its workers, its factories, its retail outlets, its freight lines, its bank lending, even its new inventions — are being mothballed.

This idled capacity, like baseball players after a winter off, takes time to bring back into robust use. So even if the recession miraculously ended tomorrow, economists estimate that at least three years would pass before full employment returned and output rose enough for the economy to operate at full throttle.