Economist Stephen Roach appeared on CNBC Asia yesterday reminding us that the 9.7% official US unemployment stat dramatically under-states reality. The US Jobless rate today is actually 11.5% when we add back in the 3m disgruntled workers who have been unemployed so long that they have stopped looking for work: “For some bizarre reason, the U.S. statisticians do not count these poor souls as unemployed”. (The under-employed statistic is more like 20% when we count in the millions who are working less than they wish due to lack of employment opportunity).
“The demand side is going to be very impaired by the U.S. consumer and there's no other consumer that is going to fill the void,” Roach continued.
While China and India make up nearly 40 percent of the world's population, Roach noted that the two countries will not be able to pick-up the slack in U.S. demand collectively, as their consumption adds up to $2.5 trillion, which is equivalent to 25 percent of total demand in the United States. That's a key reason to look for a double dip,” he said, reiterating his view of a 40 percent chance of a double-dip in the next couple of years.
I wish I could disagree with him. It feels like October 2007 deja vu all over again.