Unemployment Rising to 9.8% Means More Economic Pain as Consumption Falls

[marmar]

Unemployment Becoming Leading Indicator for Pimco’s New Normal
By Rich Miller


Oct. 5 (Bloomberg) -- Mohamed El-Erian says economists are wrong to dismiss unemployment as merely a lagging indicator, a sign of where the economy has been. For the chief executive officer of Pacific Investment Management Co., the 26-year high jobless rate is also an omen of things to come.

The climb in the September rate to 9.8 percent, double the level at the start of last year, leaves the U.S. saddled with about 15 million people out of work and with limited prospects. That will further hurt the housing market and weigh on the wages of those still employed, threatening to undercut the economic recovery, according to Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.

“Today’s unemployment rate is much more than a lagging indicator,” said El-Erian, whose Newport, California-based Pimco manages the world’s largest bond fund, in an e-mail after the Labor Department report on Oct. 2. “It is also a signal of future pressures on consumption, housing and the country’s social safety net.”

The job market tends to trail the economy in a recovery because companies hesitate to take on more workers until they are convinced the expansion will last. What’s different this time is the “large and protracted” rise in joblessness and the likelihood that it will stay high for years, according to El- Erian. That means unemployment will affect the economy going forward, not merely reflect where it has been. ............(more)

The complete piece is at:

[bbinacan]

1. I'm thankful to be working

and a new project just got approved for next year.

[marmar]

2. Were you unemployed for a while?

nt

[bbinacan]

6. No, but the last year

has caused me to be nervous. I feel positive enough now that I bought a 2010 Jeep Wrangler Unlimited Rubicon.

[marmar]

7. I'm not an SUV person, but I love that vehicle.

nt

[bbinacan]

9. Thanks.

The gas mileage sucks but my job requires a sturdy off road vehicle. It helps that I'm paid mileage.

[SoCalDem]

3. I heard the other day that it's now 80%..not 70, as we have been told

80% "service economy" = INSANITY...

[Hannah Bell]

4. with 40% of all profits going to the financial industry.

[marmar]

5. An "economic power" with an economy that's 80 percent service-based.....

..... won't be an economic power for very much longer.

[taught_me_patience]

8. Please ignore the 9.8% rate. Many people have out of the workforce

Use the U6 rate, which measures discouraged workers and underemployed workers. U6 is at 17%.