This Recession Is Different

If you are one of the long term unemployed you knew that.

The median duration of weeks unemployed has risen over 2.5 times when compared to previous recessions.  In past recessions the unemployed could expect to be out of work for 10 weeks, now it is more like 50 weeks and climbing. 

You can view a larger version of the graph here.

This correlates to a previous post on this site describing the cash rich condition of many corporations.  Corporations are sitting on cash, lots of it.  They downsized rather painfully, brought their balance sheets and cash flows statements under control, which also means inventory levels are very low.  Companies simply are not keeping a lot of inventory on hand.  “Order it and we will make it for you” is the rule of the day.

Companies are waiting for clear, crystal clear signs the economy is recovering before they will commit to hiring new employees.  Which leaves an awful lot of good people on the sidelines and college grads too.

Compounding the issue is uncertainty.  Congress and the President have embarked on a program of change which is unprecedented.  How all these reforms will play out, from the Financial Systems overhaul to TARP to Healthcare are large unknowns, and when faced with unknowns companies simply postpone plans.  Better to sit on cash and know where it is, than to risk it and lose it.

The Government is in the business now of picking losers and winners and with 2,000+ page bills passed in the middle of the night.  Uncertainty is King.

If you are an insurance company, would you have hired more workers in the past year?

If you are a financial services firm would you hire more workers considering the Dodd/Barney Financial Refrom package just passed and even Dodd admits he does not know how it will play out?  For someone who experience hails from the Peace Corps in South America he wields an awful lot of influence. 

If you are a small business would you hire more workers considering the financial reform package has brand new reporting mandates for your business and that the IRS is hiring 20,000 new agents to enforce said mandates?

Cap and Trade is next.  Taxing of Carbon Emissions, making traditional electricity generation more expense to force non-carbon alternatives.  This will really hurt us in Connecticut.  We have the highest or close to the highest electricity rates in the country right now.  A double hit for us.

Business pulls in their plans and expansions in the light of uncertainly.  Its a safe bet for them, this least risky path, they have to answer to their shareholders.  Sadly our elected employees have had to answer for little.