Bad news, good news...

To stray off the investment topic for a post, I couldn’t help but post this (I’ll return to investing next week). I came across a handful of charts on a blog that I follow called “Calculated Risk” and wanted to pass along for your observation (FYI – Calculated Risk is an excellent blog for any of you economics/finance nerds out there…it daily posts economic/finance data and indicators. For you non-economic/finance types, I dare say you’ll find it boring!). The following four graphs tell an incredible story about unemployment and the current state of the economy. Employment is always a huge factor in the “health of our economy” equation. It is also a factor that helps pull our economy out of the hole and back on solid footing…after all, the more people are employed, the more of their paychecks get pumped into the economy, right?

Keep in mind, the unemployment numbers are based on data from the government – the Bureau of Labor Statistics (BLS) – so I might venture to say the situation is actually worse than the charts below might indicate. However, we’ll take their data at face value for now. One day I might post about the BLS and how they conveniently falsify determine their unemployment numbers.

Anyway, I always like to get the bad news out of the way first so here you go…

What do these last two charts mean? Basically, it’s going to take the economy a lot longer to recover than it has in the past.

And now for some good news:

Despite high unemployment and a prolonged economic downturn, people are increasing savings and paying down debt. Have a look at the following two charts. The second shows “revolving consumer credit” - if you recall the post from Debt Happy, revolving consumer credit is credit card debt.

Of course, as has been noted before, people who pay off debt and save more are in effect not pumping money into the consumer machine and propping up businesses. But as I've also proposed, we’ve been living with an overinflated economy based on wants, not needs. More individual saving and less individual debt will help purge and deflate the economy to a healthy level. I consider this good news.

“No discipline seems pleasant at the time, but painful. Later on, however, it produces a harvest of righteousness for those who have been trained by it.” - Hebrews 12:11