I continue on the employment subject because I believe it is of great importance in evaluating the economy's prospects, shorter and longer-term. First, a chart (click to enlarge) that compares the annual growth rate of the civilian labor force (those that want to work - red line) to growth in the payrolls of the private sector (those that are currently working in businesses - blue line).
The initial observation is that we are likely already in a recession, if we judge by the history of past drops in the growth rate of payrolls below that of the labor force. The economy is now creating jobs slower than people need them.
Also important is the simultaneous decline of both growth rates to near zero. The drop in payrolls means that the economy is losing jobs right now, whereas the drop in labor force means the economy is unlikely to create many jobs in the future. This has only happened twice in the previous 50 years, in 1991 and 2001. Interestingly, the recoveries following both recessions were called "jobless".
But in 1991 and 2002 household debt as a percentage of disposable personal income was 85% and 108% respectively, whereas today it is at 136%. Since debt must be serviced from future earned income, the current combination of record-high debt and zero (soon, negative?) job growth is very dangerous, both from a short and long-term perspective.
Therefore, I believe that the current credit crunch is not merely a cyclical event but a fundamental problem that will be with us for a long time to come.