Unemployment Muddle Too

Not only is the housing market a mess to interpret, so too is the job market. Today’s weekly report on initial unemployment insurance claims showed a good drop: the week ended September 19th had 21,000 fewer such claims than the week before. The problem is that the overall figure is stuck above half a million at 530,000. So while we can cheer a little that things are moving in the right direction, we cannot be too happy that job losses are still accumulating at a very heavy rate. Clearly the job market is still very unhealthy and is seemingly a very long way from recovery.

There is no need by now to recount what the overhang of high unemployment means to the economy. Suffice to say that at this rate we will be facing an inevitable question about whether to inject more government stimulus sometime early next year.

The private sector is still extremely weak and apparently incapable of sustained growth from within itself.

Another useful statistic within the job market, one that gets far less media attention, is the Mass Layoffs Report published by the Bureau of Labor Statistics. This report tracks instances where an employer has announced a lay off of more than 50 workers at a time. Inevitably that means it tends to relate more to medium and large businesses than to smaller business.

This week’s release of the August report adds weight to the disappointment the private sector performance engenders: after a few months of declining reports of mass layoffs the data now shows a rebound back up to 2,690 lay-offs affecting a total of 259,307 workers. Now we can see why those initial claims figures are so stubbornly high: plenty of employers are still cutting their workforces aggressively. Since the onset of recession there have been 44,669 mass lay-offs have accounting for the loss of 4,556,636 jobs.

Obviously private employers are still too frightened about the outlook for sales to begin the re-hiring process. Plus I think we will find that many have cut their workforces permanently so that even when the economy picks up they will not re-hire in the same volume that they cut.

There is just no way to spin the job market news too positively. We are constantly reduced to making relative statements and to the thought that ‘at least things aren’t as bad as they were’. That is, of course, cold comfort to anyone without a job. And it casts a very long shadow over ant prediction of growth in the economy. Every job lost represents lost potential consumption and savings. They have to be replaced for us to get back to ‘normal’. Plus, I would be remiss not to remind us all of the hidden part of the job issue: our population keeps on growing. That means that the real increase of unemployed labor is not just those being laid off, but includes those entering the workforce as well. The US economy needs to generate about 300,000 new jobs a month to offset the constant growth in its workforce. But we have been shedding more than that every week or so. Even through this awful crisis jobs have been created sufficiently to stop the unemployment rate ballooning above 10% – although it looks as if we will top that eventually before things turn around – but those new jobs have been dwarfed by our workforce growth and the lay-offs.

There is just no evidence of a turn around on the horizon. The jobs market always lags the economy by a few months, and since the recession has only just ended and the outlook for growth is currently weak over a six to none month period, I can see no reason to predict an improvement in unemployment until the middle of next year.

Meanwhile let’s hope the lay-offs abate and we stop accreting to the unemployment rolls at the current pace. Every week that passes with initial claims at last week’s level – even though it represented an improvement – digs the hole we have to climb out of deeper and deeper. And the human cost just keeps on growing.