I have gone into painful detail regarding the California housing situation and need to reiterate that housing will not bottom in 2009. The reason I continue to beat this drum is so people don’t drink the Kool-Aid (again) and go out buying a home simply because it is half-off and you saw a kid spinning a neon colored sign. I’ve heard a few pundits going off this line of argument again and they are simply wrong. After posting an article with the dire 8.4% number from November, we got a release telling us unemployment had shot up to 9.3% in December. That number is stunning. Keep in mind that since 1976 (data from the Census) the highest unemployment rate for California was 11%. I expect us to break through that. In fact, we are already there if we calculated the number accurately.
You need to remember that part-time workers looking for full-time jobs or those not working who have given up are not counted in the unemployment numbers. I know personally many people that are working one or two part-time jobs but want full-time employment. I’m sure you personally know of cases like this as well. Basically 1 out 10 people in the state is without work.
What is more startling in the report is the massive amount of involuntary layoffs:
What that means is in one month, California saw 166,000 people added to the unemployment lines and in one year, the number has jumped a stunning 653,000! That is simply jaw dropping. And as I expect with our current budget deficit still in shambles with a $40+ billion budget deficit for the next couple of years, and the fact that we have yet to see the massive recasts with option ARMs, the state is in for a tougher 2009. So we will break that 11% mark.But if we dig deeper into the data, we realize even more deterioration:
Of the unemployed:
The number leaving the workforce by choice is tiny. This is an across the board cut down in the employment sector. That is why the California 2009 forecast I put out will hold true since we’ve relied so heavily on the finance and real estate industries. What is disturbing is the growing number of those on unemployment insurance:
“In related data, the EDD reported that there were 655,445 people receiving regular
Those filing for unemployment insurance is skyrocketing. Some of you may be aware of this insurance but I think it is important to know what it is:
“The amount for benefits available is based on the claimant’s earnings in the base period. To qualify for benefits in California, a claimant must have (1) earned at
Just before leaving office, former President Bush did sign a law extending unemployment insurance by 13 weeks from the current 26 weeks. So 39 weeks or three-fourths of the year will be covered. The max anyone can receive is $450 per week in California. So let us run the numbers to see how much is going out per week:
Number currently receiving unemployment insurance: 655,445
Keep in mind that unemployment insurance is financed by employer taxes who pay up to a maximum of $7,000 per year. Do you think with the bottom line being hit with many companies that some can actually afford this? Keep in mind when the extension was signed in November, many people had already started exhausting their funds. The government had to dig deeper in to its pockets, money which it doesn’t have.
Japan has many lessons for us with its lost decade. It is probably more likely we will head down toward a Japan route instead of a Great Depression world if we do have a major economic calamity here. The fact that we have already sunk trillions into the economy and zombie banks and now we are on path for a major fiscal stimulus program, we can expect a sluggish next 10 years. Much of our future money is being spent right now. Maybe a lost decade is better than a major Great Depression? That seems to be our choice. Any pundit that tells you we are going to have a second half recovery needs to be banned from ever appearing on the air again. Really, do you think things will be shiny again by again by July?