Going up: Unemployment. Going down: Optimism.
October 2, 2009Jon Brooks 1 Comment »Aye caramba, oy vey, and ah fudge. The September unemployment report? Not so good. The jobless rate hit a 26-year high of 9.8% and the economy shed another 263,000 jobs, worse than expected.
If one of those positions was yours, you could probably give a rat’s rear end about what the economists are saying. Hunched over your checkbook, trying to telekinetically will a decimal point one digit over to the right… Dry statistics cranked out by the government and pontificated on by experts do not tell your story. And who needs a PhD’s analysis to drive home what you already know: A good job is hard to find.
So if you’re already in a bad mood, just skip this post and click here. See? It’s not so bad!
Now on to the dismal scientists and their early commentary on the bad news.
Economist Dean Baker of the Center for Economic and Policy Research is decidedly downbeat about what this report foretells:
The data in this report indicates that a turnaround in the labor market is not imminent. Continuing losses of jobs and declines in hours, coupled with stagnant or declining real wages, means that workers’ purchasing power is still falling. There are no further tax breaks scheduled to boost demand and state and local governments are cutting back and raising taxes to address budget shortfalls. The immediate future does not look good.
On Capital Gains and Games, Dartmouth economics professor Andrew Samwick also laments:
From the BLS this morning, everything you would like to be heading down moved up, and everything you would like to be heading up moved down…Digging a bit beneath the headlines, the labor force participation rate fell to 65.2 percent and the employment to population ratio fell to 58.8 percent. Recent media attention has focused on…an alternative measure of the unemployment rate designed to include marginally attached (including discouraged) workers and those employed part-time for economic reasons. It rose to 17.0 percent.
The Calculated Risk blog is equally pessimistic:
It is possible that the unemployment rate will hit 10% in October (the current unemployment rate is 9.83%, an increase of 0.17% from August).
With similar job losses in October as in September, or just more people participating in the work force – perhaps looking for one of the scarce holiday retail jobs – the unemployment rate could easily hit 10% this month. If not in October, then probably in November.
Unemployment diffusion indices
Both the “all industries” and “manufacturing” employment diffusion indices had been trending up – meaning job losses were becoming less widespread. However both turned down in September. This series is noisy month-to-month, but it still appears job losses are widespread across industries.
Ugly. Ugly. Ugly.
The ubiquitous Robert Reich says the situation is actually worse than the headlines indicate and sees an economic/political spiral ahead:
Unemployment will almost certainly be in double-digits next year — and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before. And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).
Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It’s already started. Next year is a mid-term election. Be prepared for worse.
On the Credit Writedowns blog, banking and finance consultant Edward Harrison warns of a possible descent into another recession and a negative impact on the stock market and corporate bonds:
(T)he labor market is till weak, weaker than it should be at this point in a cyclical recovery. Unless this changes in the fall and winter, a double dip recession is going to be more likely. While the preceding points stress the negative, I should point out that my baseline view is for job losses to continue to diminish, albeit at a slow pace. I would anticipate job gains to appear by the end of the year or early in 2010.
… Even if we see job gains by Q1 2010, this will be a full 6 months after the manufacturing sector turned up. This must limit consumption because spending can only increase through higher employment and income or increased debt and leverage. As most of the cost-cutting and productivity gains inherent in those cuts is now behind us, the heavy lifting begins. Earnings growth is likely to be weak in this environment.
How a fully priced equity and corporate bond market continues to rally in the face of these factors is beyond me. I see government bonds as a better bet than either corporates or equities for the medium-term.
And on Angry Bear, ex-CIA economist Spencer sees no silver linings:
Not only was the employment report disappointing, but previously reported encouraging leading indicators of employment were revised away.
In addition, employment growth in the household survey no longer appears to be bottoming. Usually the household survey leads the payroll survey at bottoms and the latest data does not look encouraging. Even the apparent bottoming in the decline in payroll employment stems more from the point that the employment drop was more severe a year ago, not that the current data is improving.
So ouch, ouch, ouch, and ouch.
Coming up: Some economists are using this report to air their views on this year’s stimulus bill and the concept of stimulus in general. We’ll post on this shortly…
October 2nd, 2009 at 4:39 pm
[...] Going up: Unemployment. Going down: Optimism. [...]