We're live blogging Commodity EDGE today and tomorrow. If you can't join us at the event, join us virtually on Spend Matters and MetalMiner.
During his talk, Bill Strauss -- click here for the first live blog covering his presentation -- mentioned how "it's an easy target to beat up on Wall Street. But there is a lack of appreciation about how vital the financial sector is for the functioning of the economy. You can look at the Fed's balance sheet to highlight this point. Historically, before the financial crisis, our main liability was currency in circulation." This represented under $1 trillion at the time in liabilities (it's climbed to $1 trillion in 2012). When the crisis ensued in 2008, Deposits of Depository institutions took off, representing roughly $1.5 trillion in liabilities in 2012 (up from roughly $1.25 trillion in 2010 and a negligible amount in 2007). Wall Street and banks have been critical in working on the demand side to keep the economy moving from a lending perspective in uncertain times, even as the Fed has had to interject liquidity into the markets.
Liquidity has been in key in a time when employers are skittish about making investments, especially those in human capital that requires a long-term commitment. Strauss observed that employment "fell by over 8.7 million jobs between December 2007 and February 2010, but it began to rise beginning in March 2010 and added 2 million jobs over the past 12 months." Tracing unemployment recently in percentage terms, he observes, "after peaking in October 2009, the unemployment rate has fallen by 1.7% percentage points."
In relative terms, Strauss notes, unemployment actually dipped below 4% in 2000 and 2001 and was as low as 4.5% in 2007. Now we're struggling to maintain unemployment numbers that are twice as high in percentage terms. Looking ahead, Bill suggests (using Blue Chip Forecast data) that unemployment will keep declining in 2012 and into 2013. In 2013, employment is forecast to hover just under 8%. In other words, despite growth in GDP, we're unlikely to see even close to a material drop to bring us back to pre-recession levels that were 40% lower.
Stay tuned as our live coverage continues!