From the DOL:
The advance number for seasonally adjusted insured unemployment during the week ending Oct. 24 was 5,749,000, a decrease of 68,000 from the preceding week’s revised level of 5,817,000.
So…great!… those 68,000 people found jobs? Nah…as Denninger points out
90,239 fell off the government’s “official statistics” and rolled into “extended programs.” That means that net-on-net the picture got worse by 22,239. It gets even better than this, however, as we are now far enough into the mess that people are rolling off even the extended benefit programs in many states! There is no current tabulation of that count, but any number greater than zero simply adds to the malaise.
Don’t be fooled it’s getting worse – not better.
The BLS announced that employment fell by 263,000 for September:
Job losses continued in September, and the unemployment rate continued to trend up, reaching 9.8 percent. Nonfarm payroll employment fell by 263,000 over the month, and losses have averaged 307,000 per month since May. Payroll employment has fallen for 21 consecutive months, with declines totaling 7.2 million. In September, notable job losses occurred in construction, manufacturing, government, and retail trade.
The fact that the unemployment rate “only” rose to the expected level of 9.8% may ultimately be positive for the markets today, but as Calculated Risk points out, the preliminary benchmark payroll revision is minus 824,000 jobs- a very large, out-of-the-ordinary revision. The size of the revision may indicate the BLS is having difficulty maintaining a fiction.
Update: Even though the BLS may be having difficulty maintaining the fiction, they can still help Goldman Sachs out with advance looks at the release before everyone else. Yesterday, Goldman revised its estimate for employment to 250,000 from 180,000. What are the odds?
“It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that’s not enough to bring down the unemployment rate.”
As Mish also points out, if we don’t get 2.5%, then unemployment will not only NOT come down…it WILL CONTINUE TO RISE.
Pray tell what happens if GDP can’t exceed 2.5% for a couple of years? What about a decade (or on and off for a decade)? If you have come to the conclusion that we are going to have structurally high unemployment for a decade, you have come to the right conclusion. Ask yourself: Is that what the stock market is priced for?
The Federal Reserve itself has said that they expect unemployment to remain high for as long as 10 years. Those unemployed consumers aren’t gonna be able to increase their consumption. It will have to be the bank employees who get all the bonuses who lead us out of recession. Are there enough of them?
Here’s an interesting chart from the Slope of Hope. The head and shoulders pattern is a classic chart pattern that technical analysts associate with a subsequent major collapse. This one shows the percent of population working and how it might reach a possible target around where it was in the 1980′s. This would be consistent with many more families becoming single wage earner families again – but not by choice…
Goldman Sachs’ uncanny trading prowess, in which it makes money on like 80% of trades, extends to its “forecasts” of the unemployment numbers. Goldman projected -250,000 and the report comes in at -247,000. Well, well, surprise, surprise. The only thing that puzzles us is whether Goldman tells the government what to report, or the governmnet tells Goldman what it will report. Oh well, no big difference in the end…
The ADP employment report showed that employers reduced their payroll numbers by 371,000 jobs. The report was expected to show that the private sector shed 350,000 jobs in July.
A Bloomberg survey of economists indicates they expect Friday’s unemployment report to show a 9.6% unemployment rate and another 328,000 jobs cut in July.
Louis Woodhill on RealClearMarkets is arguing that the low level of business investment we have seen is to be associated with a much higher level of unemployment:
The BEA numbers (which were revised slightly on June 25) show an accelerating decline in “real nonresidential fixed investment”. This measure decreased 37.3 percent in the first quarter of 2009, compared with a fall of 21.7 percent in the fourth quarter of 2008. Given that employment is a direct, linear function of private business investment (PBI), unemployment can be expected to rise much farther in the months ahead.
Here’s why. Because a lot of PBI goes toward offsetting depreciation and increasing productivity, it takes a 5% year-over-year increase in PBI to produce a 1% increase in the number of jobs. Correspondingly, a 5% decrease in PBI will yield a 1% reduction in total employment.
The unemployment rate a year ago was 5.5%. Because the potential labor force is growing, we need employment to increase by 1% annually to keep the unemployment rate from going up. The 37.9% investment decline reported by the BEA can be expected to eventually produce a reduction in total employment of about 8.5%. Accordingly, we can expect unemployment to rise to about 14% within a year unless the downward slide of PBI is reversed.
Unemployment at the end of December, 2008 was 7.2%. Six months later it is 9.5% – a gain of 2.3%. If unemployment continues to rise at that rate for 12 more months, then we could indeed see 9.5+4.6 = 14.1% unemployment. Investment is fueled by savings. Although the government reports the savings rate up to 7% of income and rising, that figure includes paying down debts…little of the new savings is going to taking on new risks…so the slide in PBI may NOT be reversed anytime soon.
The BLS jobs report is pretty hokey. Nonfarm payroll employment supposedly fell by only 345,000 in May, yet the unemployment rate is up to 9.4%. Let’s see:
May = 9.4% X 155 million workers = 14.58 million unemployed
April = 8.9% X 154.7 million workers = 13.77 million unemployed …
an increase of 811,000 from April to May …..seasonal adjustments?, number of establishments? Nah… There’s sumpin’ rotten here.
Zero Hedge is skeptical of the BLS unemployment release, highlighting the seasonal adjustments made and the temporary hiring of census workers:
“I will bet one double Quarter Pounder with cheese and bacon that next month, the revisions of the April numbers will be on the order of an additional 85,000 unemployed. My guess is that, discounting the Census Bureau hirings, April saw 680,000 newly unemployed workers.’
Econompicdata generally concurs with Zero Hedge’s assessment.
Last week DOL reported the advance figure for seasonally adjusted initial claims was 610,000, a decrease of 53,000 from the previous week’s revised figure of 663,000. Yesterday, Zero Hedge posted a report by Structural Logic which anticipates another decline:
Last week, Swamp Report posted our own analysis of Easter week unemployment claims and found that the next week normally had a 50% move in the other direction. In other words, the results would indicate that unemployment claims to be announced tomorrow would reflect an increase of around 70,000. We’ll see tomorrow…