Earn What You Spend

More confirmation of the long road ahead came out this morning: 

Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. percent, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. October’s drop in payroll employment followed declines of
127,000 in August and 284,000 in September, as revised. Employment has fallen by
1.2 million in the first 10 months of 2008; over half of the decrease has occurred
in the past 3 months. In October, job losses continued in manufacturing, construc-
tion, and several service-providing industries.

2008 has been a rough year - 1.2 million jobs have been lost.  This was following by a corresponding uptick in the unemployment rate to 6.5%, which is, according to the WSJ, the highest it has been since 1994.  

This unemployment disproportionally affects those with less education - it has historically been highest among those without a high school degree, which shows the real value of education.  Here are the numbers from September, broken out by educational background. And here is a graph showing the rather explosive growth in unemployment (click through for a better picture): 

Source: BLS

What does all this mean?  People are without work.  People want to be working, want to be providing for their families, but are unable to do so. We don’t always appreciate it, but work is a vital part of so many of our lives - it provides dignity, stimulation, stability, and social interaction.  It binds us together as a society, and plays an incredibly important role in providing meaning to our lives.  Having that taken away, especially when you are eager to work, is unbelievably difficult and threatens to destroy the very fabric of our society.  

We all know the saying, “Give a man a fish; you have fed him for today. Teach a man to fish ; and you have fed him for a lifetime.”  When there are fewer fish in the sea, this becomes a tall order. 

When you lose your job, your earn/spend ratio almost always moves in the wrong direction (unless you’ve really prepared with an emergency fund, but that’s another story).  So at the very moment we need to be reigning in our spending because we’ve overextended ourselves, our earnings are dropping faster than our decrease in spending, leaving us worse off than before.  It’s the same cycle we’re witnessing in a number of areas.  

These are tough times, and there are no clear paths out of the forest just yet.