10% Unemployed: Change We Can Believe In?

by Dollars and Sense

Just about everyone was caught off guard by the November employment reports, which indicated that the US unemployment rate had actually declined .2% to 10.0%, and that a mere 11,000 jobs were lost during the month (forecasts had called for 130,000, and the ADP private sector report released only days earlier tipped the scales at 160,000). Moreover, the September and October readings were reduced significantly, confirming the sentiment that large-scale corporate reductions have ceased to be the major factor in the employment picture. Hence, concern shifts to whether or not the still anemic economy can actually generate any kind of jobs growth. Here, the picture is in many ways a tad more optimistic than that which followed last month's report, but with some major exceptions.

The underlying upward trend was driven by slowing declines in construction and manufacturing. In the case of the latter, the savage inventory rundown that ran from last October to late this spring ensured that a certain level of restocking was necessary, especially given the partially-restored wealth effects from surges in financial and commodity markets that resulted from unprecedented monetary laxity and financial-sector coddling. And demand for capital goods seems to be perking up, so further gains in the sector are possible in the months ahead (barring any further financial catastrophes). But in construction, the picture is blurred because of the state of the commercial real estate sector, which is currently poised to take major hits, given poor performance in the retail sector (i.e. possible bankruptcies), so it's hard to see continued strength here.

One sector in which things really picked up was in temporary work. An uptick in temp hours is a usually a good sign that overall employment demand is picking up, but it's perhaps helpful here to put the rise in context by juxtaposing it with a welcome, but ever-so-slight reversal of the drastic decline in the average workweek, which has, during the last few months, hit--and stayed at--record lows. Together, these data suggest that employers are, kicking and screaming all the way, easing up on besieged workers just enough to keep them ticking over the heroic gains in productivity by hiring a few temps, and offering just a bit of overtime. These productivity gains have, in the decided absence of revenue growth, alone accounted for a truly impressive--given the weak economic backdrop--corporate profits performance registered in the third quarter. But this activity may be of very questionable durability and quality: after all, many new hires, especially amongst newly-graduated college students (a group which has been one of the most severely affected by the crash in the labor market), are coming on as interns, or at much reduced rates of pay, and that reduction means that employment spending multiplier effects that generated further hiring (even at the dreadfully slow levels characteristic of the last two recoveries) in past cycles could be diluted still further.

Another area experiencing positive movement of a sort was retail: in this sector, too, the positive development consisted of the lack of a negative one, as the pace of losses continued to slow. But holiday hiring, which had been dangerously subdued in October, picked up significantly in November. Still, many of these people will be junked after Christmas like so many of the useless gadgets and packages they had worked so hard to flog in the preceding weeks. And in restaurants and taverns, employment actually slowed.

The government continued to add jobs, but an 8,000 monthly figure seems, frankly, pathetic (if not insulting) given the enormous size of the stimulus and bailout packages. And the stimulus money is about half gone, now. It's unacceptable that an economy this devastated (and in such desperate need of public works) is being so neglected. But the folks on Wall Street are getting nervous about spending, and Friday's numbers, which foreign investors saw as positive, pushing the dollar up, were seen on the Street as evidence that the Fed might be all the quicker to raise interest rates and exit from its support programs for the banks: so US stockmarkets posted only slight gains. This illustrates that any further stimulus will be hard fought over by the corporate whores in Congress, though some Democrats are now talking about redirecting returned TARP money to a second stimulus.

One very negative development concerns the long-term unemployed: the roll of persons unemployed for longer than 26 weeks continued to expand. And though the U6 reading, which counts underemployed persons seeking full-time work also reversed its downward spiral at last, registering a 17.2% reading from November's 17.5%, the fact that so many have been out of the workplace for such extended period of time merely increases the likelihood that they will not be hired as long as the labor market is decidedly slack (an increasingly popular tenet of employer propaganda has it that such persons' *skill sets* deteriorate when they've been idle for this long, and it's better to go with someone else, especially with some 6 applicants looking for each available job--that figure is from about a month ago, I think).

So, all in all, the reversal in layoffs seems certain (for now), but any substantial uptick in hiring will have to wait for next year, at least. And, though some sectors show room for one-off or even sustainable gains, the potential levels of gains, at best, remain extremely subdued.

Labels: ADP private sector employment report, economic indicators, employment, real unemployment rate, US employment

 

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12/06/2009 04:10:00 PM