Unemployment at 25-Year High

The widely anticipated September Unemployment Report covering the month of August was just released. Let’s dive right in and take a look at the numbers . . .

Unemployment Rate
June: 9.4%
July: 9.5%
August: 9.4%
September: 9.7%!!

Higher than the expectation of 9.5%. Recall that the rate moved down last month from 9.5% to 9.4% as the labor pool shrunk. This move higher puts the rate back on the track it previously held and would project to a likely double digit rate unemployment rate in the 4th quarter.

Where’s the stimulus? Where are the jobs? Bulls would say the employment situation is stabilizing. Pragmatists look at the numbers and see an economy settling in to a likely low growth path at best. The unemployment rate of 9.7% is the highest since 1983. The underemployment rate of 16.8% is very sobering!!

Non-Farm Payroll (click here for definition of this term)
June: loss of 322k
July: loss of 467k initially revised to a loss of 443k and now revised to a loss of 463k
August: loss of 247k revised to a loss of 276k
September: loss of 216k

Close to consensus, but the prior two months had revisions showing further declines of 49k. (The prior month was revised from a loss of 247k jobs to 276k. July was revised from a loss of 443k jobs to 463k jobs). Manufacturing lost 63k jobs, government showed a loss of 18k jobs with more of these at the state level.I repeat my comments from above. We are not witnessing any inclination by private companies to start the rehiring process. As such, the likelihood of long term structural unemployment is growing. This fact will serve as a real drag on consumers in general and the economy as a whole.

Average Hourly Earnings
June: +.1%
July: 0.0%
August: +.2% revised to +.3
September: came in at .3 with the prior month revised to .3 as well.

Largely due to the increase in the minimum wage. Do not look at this increase as an indication of potential growth in retail sales.

Average Hourly Workweek
June: 33.1 hours
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours

As expected the average hourly workweek remained unchanged. This number, which remains mired at a level last seen in 1964, is an indication that an expected rebuild in inventories is not on the near term horizon.

Further Color: the economy remains significantly challenged. Despite all of the government stimulus and government programs, in my opinion the economy is very vulnerable. Behind these numbers, the consumer is seeing few signs of improvement in the jobs space. That reality is impacting the sluggish retail sales along with the continued increase in delinquencies and defaults on the credit front.

Market Reaction: futures have been bouncing up and down post-report. Prior to the report, equity futures indicated a slightly positive opening to the equity market. Now the futures are closer to unchanged.

Interest rates have also bounced around, but the front end of the yield curve seems better bid as the unsettledness behind these numbers makes investors nervous.

The dollar index is somewhat improved but not in a meaningful fashion.

Add it all up and I see the following:

  • the cheerleaders can put away the pom-poms
  • the pure doom and gloom guys who have been short forever remain frustrated
  • the economy remains challenged and will bump along the bottom. No “V” recovery, but more like the “caterpillar” designation assigned by our Sense on Cents Economic All-Star Bob Rodriguez.

Get used to it because it is not going to change appreciably anytime soon.

I repeat my market call from the other day in which I believe equities will retreat from current levels.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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1 Comment on Unemployment at 25-Year High

  1. Our economy is so intertwined that its almost a catch 22 we find ourselves in. Consumer spending can’t go up when people are still losing their jobs. While how are companies going to start hiring people if no one is spending any money, or has the money to spend. These stimulus packages are really just band-aids. We need to find a solution, and its going to have to be a slow one to work.

    Despite the gains in other areas of the economy, I don’t really think anything can get straightened out until we get employment back on track. It all starts there. I think the current administration is doing all it can do at this point, and a lot of the initiatives seem to be merely for show. They sound good, but have no lasting impact. There are no quick fixes to this thing, its just going to be a slow and gradual thing. It can’t go on forever, can it?

    Check out my blog on the unemployment situation at… http://www.thedebtgazette.com/2009/09/u-s-jobless-rate-highest-since83/

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