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| Re: Why the unemployment rate is dropping (1298971) | |||
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Re: Why the unemployment rate is dropping |
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Posted by Dave on Tue Jul 7 22:56:43 2015, in response to Re: Why the unemployment rate is dropping, posted by bingbong on Tue Jul 7 22:02:58 2015. Say what?It was the collapse of tech stocks in 2000 that lead to the 2001 recession. In one year the IT industries effectively reversed the net job gains of the prior 6 years. Capacity utilization fell from a May 2000 high of 88.8% to a historic low of 60%. Yet as fast as IT manufacturers cut output and payrolls, these cut-backs still lagged behind the plummeting demand for their products. The IT slump spread throughout and beyond manufacturing. Within manufacturing, the clearest impact was experienced in miscellaneous electrical equipment and supplies, which includes makers of magnetic and optical recording media, and in measuring and controlling devices. Employment in the former declined by 21,000, after having declined by 4,000 the previous year, while the latter eliminated 17,000 jobs. By third quarter growth returned? I think not. Between 2001 and 2008, Silicon Valley employment declined by about 17%, representing a loss of slightly more than 85,000 jobs. Following the 2001 economic downturn, high-tech industries in Silicon Valley recovered at a slower rate than in the rest of the country. As to why there was a tech bubble in the stock market...that's a different story. The real estate bubble was the result of both the Clinton and Bush administrations aggressively pursued the goal of expanding homeownership, so credit standards eroded. Lenders and the investment banks that securitized mortgages used rising home prices to justify loans to buyers with limited assets and income. The economy that Clinton handed to Bush in January 2001 was an economy that was being carried by an unsustainable bubble that, in fact, already was in the process of deflating at the time Bush took office. The S&P 500 was well below its 2000 peak and the NASDAQ was down by more than 40% on the day that Bush took office. This pretty much guaranteed a recession. |
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