It's the only indicator that matters, really, and it just got much worse. 467,000 people lost their jobs in May, much higher than the 365,000 economists expected. In April, "only" 322,000 people lost jobs, suggesting to some that the rate of job loss was slowing. But the dismal new numbers reflect an increasing sense that more has to be done to mitigate the effects of this recession, and to that end it's worth reading John Judis' concise argument in favor of a third stimulus (he says second, but he forgets the Bush stimulus in spring '08).
Keep in mind that when we say 9.5 percent, we're talking about people who have lost their job and are looking for a new one. But when you factor in people who "currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past" "plus total employed part time for economic reasons," and you get a rate of 16.5 percent unemployment -- nearly one in five potential workers has lost significant wages and work in the current economic environment. That's the true cost of this recession, and a stark political warning to Barack Obama and congressional Democrats.
The only silver lining the administration officials can present is the fact that we still haven't seen a majority of stimulus outlays -- the actual spending of the money authorized in February to fight unemployment. The bulk of that money will be spent in the next six months to a year and will hopefully have a mitigating effect on the current scenario. But we should also remember that the unemployment news is also bad news for the financial sector: The "stress tests" underwent by banks are becoming increasingly outmoded. Unemployment has exceeded the adverse scenario projected in the tests (see the graph below from Calculated Risk). I'm not worried about bank failure now -- my sources think capital reserves in most banks can withstand the current situation-- but I am worried that this will continue the hesitancy of banks to lend money.
-- Tim Fernholz
