Scariest Thing You’ll See This Month

I know the BP spill is scary (oil now washing up in the Florida Keys!) and I know a new vampire movie is coming out this month. But put the following two things together.  First, let’s look at Friday’s unemployment report:

The economy has lost 0.6 million jobs over the last year, and 7.4 million jobs since the recession started in December 2007. Ex-Census hiring, the economy only added 20,000 jobs in May.

The unemployment rate decreased to 9.7 percent.

Percent Job Losses During Recessions The second graph shows the job losses from the start of the employment recession, in percentage terms (as opposed to the number of jobs lost).

The dotted line is ex-Census hiring. The two lines will rejoin later this year when the Census hiring is unwound.

For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early ’80s recession with a peak of 10.8 percent was worse).

That graph is by itself scary enough when you really look at it.  It compares all the post World War II recessions showing how deep they were (loss of employment and jobs) and long they were (length of time until we recovered all the jobs, not just started growing GDP).  Obviously, the current recession is the deepest and greatest loss since the Great Depression. But it’s also on track to take the longest period of time to recover, taking longer to recover than the nearly 4 years it took to recover from the “mild” 2001 recession.  To me this graph is like looking at some gross, scary, ugly monster in a horror movie, but it gets worse because…

Now we get this from the G20 Finance Ministers (via Financial Times and Calculated Risk):

First, from the Financial Times: G20 drops support for fiscal stimulus

Finance ministers from the world’s leading economies ripped up their support for fiscal stimulus on Saturday …

The communiqué of the meeting made it clear that the G20 no longer thought that expansionary fiscal policy was sustainable or effective in fostering an economic recovery because investors were no longer confident about some countries’ public finances.
Excerpts with permission

This means that the leaders of the 20 largest economies have agreed to stop fighting unemployment and instead start tightening their budgets. No more stimulus – “austerity” instead. No more hope for the 10% unemployed in U.S., or the 8.7% unemployed in Canada, or 10% unemployed in Europe, etc, etc.
If the unemployment graph is a gross, ugly monster; the news from the G20 is an innocent, cute teenage girl deciding to enter the dark, abandoned house all alone while the soundtrack starts playing ominous sounding music. We know how that scene goes….

worst global economic crisis since the 1930s

I will have more to say on Tuesday at the LCC Global Perspectives Conference, but it’s not pretty.  The planet’s in trouble.

Both the IMF and World Bank are now forecasting an outright fall in global output in 2009, with a larger contraction than previously forecast in the advanced economies and sharply lower expected growth in the emerging world. I am not sure that even Nouriel Roubini was forecasting an outright fall in global output a year ago. Anything below 2% is generally considered a global recession.

The most visible manifestation of the scale of the downturn continues to come from Asia — with the sharp fall in Asian exports to the world mirroring the sharp fall in global demand. Japan’s exports are now down 50% from last February. The IMF is now forecasting a 6% of GDP contraction in Japan in 2009. That is a contraction of magnitude as emerging economies experience during their crises.

via Brad Setser: Follow the Money » Blog Archive » “This is unquestionably the worst global economic crisis since the 1930s”.