ShoreBank Blog

The Messenger

by David on December 15th, 2008

Messengers have little to fear when delivering good tidings, but no messenger wants to be the bearer of bad news.  Yet the fact remains: we are a long way from victory as the scope of the Panic of 2008 emerges in its full gloom.  We are in a consumer-led recession, where loss of wealth from eroding home values and plunging 401(k)s leads to loss of both the ability and the willingness to spend.  Less spending leads to less employment, which leads to less wealth in a cycle that is beginning to turn vicious.  Eventually the cycle will be broken, but that time isn’t now.

One of the key indicators I watch is the Bureau of Labor Statistics’ weekly count of the number of persons filing unemployment insurance claims for the first time.  To be eligible for unemployment compensation a person must:

*  Have worked during a one-year period.
*  Be unemployed through no fault of his or her own.
*  Be physically and mentally able to work.
*  Be available for work.
*  Be actively looking for work.

Over the last five weeks 2,678,000 Americans, an average of 536,000 a week, met these criteria and applied for unemployment benefits.  Nothing like this has been seen since the major recession of the early 1980s.  From September 1981 through June 1983, weekly initial unemployment claims averaged 543,000.  They peaked at 695,000 in October 1982, and never were less than 434,000.

Today, 4,429,000 Americans are collecting unemployment benefits, compared to an average of 2,725,000 over the last 20 years.  Looking back again to the early ‘80s, we see that continuing unemployment claims averaged 3,862,000 and topped out at 4,713,000 in November 1982.

Times were different then, and the enemy was rampant inflation.  The Federal Reserve and the Treasury moved more slowly and less aggressively.  But the message is that bad times are not going away soon.  Keep an eye on weekly unemployment claims, released every Thursday morning for an early clue to a turnaround.

Tags: community development, economic predictors, financial crisis, green banking, ShoreBank, triple bottom line, unemployment rate

This entry was posted on Monday, December 15th, 2008 and is filed under Banking Industry. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.