State of The Job Market and The Consequences

The most recent unemployment number is 9.4% as of the end of July 2009 despite a ~250k job loss. This is an improvement over the previous month's unemployment number of 9.5%, how can this be? The unemployment rate is determined by dividing the number of unemployed by the number of people in the labor force. The only way the unemployment number can contract is by shrinking the labor force, and that is exactly what the Bureau of Labor Statistics' unemployment number reveals. One last note on unemployment is that people who are unemployed are looking for work for a much longer period of time. According to EconomPic, 50% of the people whom are unemployed will be searching for work an average of approximately 15 - 27 weeks. This is certainly not good news for the various States' unemployment insurance programs, and it could not be at a more difficult time for most States.

The past 18 months or so have been tough on the job market, and it is no surprise that the amount of people on food stamps has broken a record. In October 2008, there were approximately 31 million Americans on food stamps. Currently, 34 million Americans are on food stamps, and the number is rising. About one in nine Americans are using food stamps.

Consumer spending accounts for about 70% of the United States economy. Is it any surprise that consumer spending has fallen the most it has in almost 30 years? According to Bloomberg, purchases slid 2 percent since the peak at the end of 2007 -- the most since a 2.4 percent decline in the 1980 recession. Not many people in our country have discretionary spending funds, so how easy is it to get some credit nowadays? Banks are maintaining their strict lending policies, and most people are not taking advantage of HELOC. According to the Federal Reserve, consumer credit (covers most common forms of credit like home loans, college loans, credit cards, etc.) is contracting at a 5% annual rate. Financial institutions are still hoarding all the bailout monies to improve their damaged balance sheets. In this country, we have to get to a point where the bailout money is enough for these financial institutions, and they can start lending again.