US job losses worst since 1945

The US suffered 2.589 million job losses in 2008, making it the worst year since 1945. December’s 524k losses caused the jobless rate to rise to 7.2%, the highest since 1993. Equally, the average work week fell to a record low of 33.3 hours.

Stock markets are still forecasting a V-shaped recession, but as the blog discussed last month, an extended U-shape is the most likely outcome, given the scale of the downturn. The current rally is based on the expected $750bn Obama stimulus programme, which is the latest in a long line of government initiatives since the recession started ($168bn of tax rebates, the $700bn TARP etc). This is said to be a Keynesian policy, akin to the New Deal.

But as Prof Peter Clarke of Cambridge University has pointed out, Keynes was never in favour of artificially boosting “demand by stimulating consumption”. He regarded this as doomed to failure. Instead, his ‘General Theory’ was based on the idea of government-led investment during recessions, as “it was common sense to put idle resources to work. Savings otherwise not invested and workers otherwise left unemployed, could create valuable public assets if government took the initiative”.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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