Last week we hit an all-time high. US household wealth was the highest that was ever recorded. Interest rates remain low and the economy is cranking along, growing at a clip of around 4%. Not to mention that unemployment is a respectable 5.6% and every talking head and a whole lot of economists are predicting robust job growth just around the corner. But hold on a minute, haven’t we heard this before? And if things are going so swimmingly well out there, why did consumer confidence plunge last week? If we’re wealthier than we’ve ever been, if capital is ridiculously cheap and things are getting better all the time then we should be positively euphoric ¯ but we’re not.

OK, so job growth has been a little disappointing and last week’s non-farm payroll number did come in at a pathetic 21,000 new jobs created compared to the consensus estimate of 125,000. The result? The dollar and bonds dove for cover. The stock market strangely enough, rose. But are we missing a broader point? Well perhaps we’re focusing on the wrong metrics? For starters, let’s consider the story behind the numbers. If you look at the official unemployment rate compiled by the Bureau of Labor and Statistics it makes some pretty broad assumptions. For starters, it only considers people who have been looking for a job in the previous four weeks as unemployed. As well, it only counts people who are looking full-time, so if you want a full-time job, but have a part-time job, you are not included in the official number. So where do we stand? If you add in the part-time workers who say they want to work full-time and all the people who are unemployed but discouraged ¯ the unemployment or rather the underemployment rate skyrockets to 11.8%.

What job growth there has been has been in new positions and new industries not traditional employers rehiring displaced workers. So not only is the unemployment situation worse than is being reported, but workers are being forced to retrain and to sell themselves to employers who are reluctant to add staff during these uncertain times. In other words, there are some major structural shifts going on in job land. Employers are also doing what they do best and carefully considering the bottom line. The conclusion that many employers have reached is that it is cheaper to add technology rather than people.

During the past two years, capital expenditures on technology have been steadily rising and now are running at an annual rate of 12% or more. The result has been a strong growth in productivity which is currently running at a 5.3% year-over-year rate. At the same time, the cost of health insurance has been surging which, when combined with workers’ compensation, now accounts for over a third of the total employment expense. As a result of these escalating costs, employers have responded by freezing hiring and putting a lid on salaries.

With technology taking a disproportionate share of the productivity pie and with displaced workers forced to sit it out, is there much hope for a speedy economic recovery? It seems hard to imagine. Sure GDP growth of 4% a year is strong, but if the population is growing at 1% and productivity reverts to its historic growth rate of 3%, then you are doing precious little to truly grow your way out of recession. No wonder confidence is plunging. If you don’t have a job, you know what an uphill battle you face, if you do, you are working longer and harder for the same dollars ¯ afraid that if you slow down you could be one of the 5.6% unemployed. The likely implications? A weaker US dollar in the months ahead and a Fed that will be more than happy to sit this year out and hope that the US consumer doesn’t completely give up on this recovery story ¯ at least not yet.