AMERICAS Transition...

I see a trend and vision of this country that cannot be seen from a trader’s window. I fear that America will soon be a country characterized by a populace of the permanently unemployed. Every day, the disconnect between Wall Street, Washington and Main Street deepens. While the stock market continues to rise towards alternate realities and Hollywood D.C. remains comfortably insulated with out of control government spending, Main Street Americans are suffering under the weight of job losses, home foreclosures and hopelessness. Rising unemployment numbers and the duration and permanence of that joblessness are ignored as irrelevant. And, moreover, the numbers being released by Hollywood D.C. do not represent fairly the depth and breadth of America’s jobless reality. In truth, today, one out of every 5 Americans is unemployed or underemployed. In September, the Bureau of Labor Statistics (BLS) reported that, since the start of the recession, unemployed persons in America had increased by 7.6 million to 15.1 million, and that the unemployment rate had doubled to 9.8%. But if we turn to the household survey that seeks to determine whether or not people are working by asking individuals their job status, rather than querying the companies that employ them, the September job loss figure is not 263,000 but instead closer to 785,000. Adding insult to injury, household net worth has declined by 14 trillion dollars since the onset of the recession and household financial distress is further exacerbated by diminishing employment opportunites. And the cycle of destruction continues. Underemployment, U-6, which includes both part-time workers who lust for full time employment and discouraged workers, “the marginally unattached,” reached staggering new heights at 17.8%. Alan Abelson quantified well the situation in an October 5, Barrons column: if we add 9.2 million of involuntary part time workers to the 2.2 million of the marginally unattached and the 15.1 million of reported unemployed, the equation sums to 26 million Americans out of work. Until job loss turns to job creation, we have little chance for a true economic recovery. Absent job creation, little else matters. Consumers cannot spend, businesses will not invest and government budgets cannot balance, 39 states are running a deficit. I believe employment is the leading indicator of our economy, and I take umbrage to the blind claim of laggard. Jobs are not created by big businesses that house under 20% of America’s labor force, but rather by SMEs – small and mid-sized companies. These companies, the backbone of the American economy, have lost access to the traditional working capital loans upon which they depend to manage their businesses. As a consequence of the sudden dearth of capital available in this market, companies that might otherwise rationalize and survive the current economic downturn are laying off workers — layoffs that will result in permanent job losses as, without access to capital, these companies have no choice but to liquidate. This phenomenon is driving not only permanent job losses, but also the eclipse of technology and the destruction of transferable industrial knowledge and product creativity.