David A. Rosenberg
November 11, 2009
Chief Economist & Strategist
Economic Commentary
drosenberg@gluskinsheff.com
+ 1 416 681 8919
MARKET MUSINGS & DATA DECIPHERING
Breakfast with Dave
U.S. UNEMPLOYMENT RATE HEADED FOR 12.0-13.0%
• How does the U.S.
government do the things
it does with a 10% deficit-
to-GDP ratio?
IN THIS ISSUE
•The unemployment rate is
likely headed for 12.0-
13.0%, but this is really
meaningless except that
it is very likely going to be
a headline grabber
• Small businesses in the
U.S. still have the
recession mentality
There are serious structural issues undermining the U.S. labour market as
companies continue to adjust their order books, production schedules and
staffing requirements to a semi-permanently impaired credit backdrop. The
bottom line is that the level of credit per unit of GDP is going to be much, much
lower in the future than has been the case in the last two decades. While we
may be getting close to a bottom in terms of employment, the jobless rate is very
likely going to be climbing much further in the future due to the secular
dynamics within the labour market that need to be discussed:
• For the first time in at least six decades, private sector employment is
negative on a 10-year basis (first turned negative in August). Hence, the
changes are not merely cyclical or short-term in nature. Many of the jobs
created between the 2001 and 2008 recessions were related either directly
or indirectly to the parabolic extension of credit.
• During this two-year recession, employment has declined a record 8 million.
Even in percent terms, this is a record in the post-WWII experience.
• Looking at the split, there were 11 million full-time jobs lost (usually we see
three million in a garden-variety recession), of which three million were shifted
into part-time work.
• There are now a record 9.3 million Americans working part-time because they
have no choice. In past recessions, that number rarely got much above six
mill