Unemployment Rate Soars, Recovery Outlook Worsens

by Eric Ames

The job report released by the Labor Department yesterday morning was dimmer than most people had projected. The expectation had been that we would see around 200,000 job cuts, according to the Associated Press (AP), so the actual number that came in--240,000--was a little surprising.

That wasn’t the biggest shocker, though: The biggest surprise came in the updated numbers from September’s job loss report. Previously, it was reported that we had lost 159,000 jobs in September, but that number was revised to 284,000 in the newest report. These numbers helped push the unemployment rate to a 14-year high of 6.5 percent and put the total number of jobs lost this year at 1.2 million, and it doesn’t appear that things are going to get better anytime soon.

One thing to keep in mind is that the Labor Department has been consistently under-reporting initial jobless claims. In August, the initially reported 73,000 was later revised to 127,000. It looks like their initial numbers have been coming at around 56 to 57 percent of the actual numbers, so with that in mind, the real numbers for October might end up closer to 420,000. Before we get too caught up in that number though, what about November and December?

If the automakers aren’t rescued, as I discussed in my blog post yesterday, we could be looking at huge number of job losses as a result of one or more of the major car makers failing. A report issued by the Center for Automotive Research said potential job losses stemming from a major failure in the U.S. auto industry could be as high as 2.5 million. Add even a fraction of that number to everything else that is going wrong in the economy right now and you can see how unemployment could quickly spiral out of control.

This holiday season looks like it is going to be a painful one for consumers and retailers alike. The way almost all economic and financial numbers are coming in worse than projected right now, I shudder to think what the numbers are going to look like for retailers. Of course it doesn’t stop there, though; if retailers struggle, that will trickle down via more layoffs and store closures. Store closures are bad news for commercial landlords, and so on and so forth. This is unlikely to end anytime soon, and it is doubtful that president-elect Obama is going to be able to magically make everything better. We are in a recession and it is going to take time to rebound, so be prepared.

Comments

[market ace:]

Well at least Wall Street employees will not suffer (the ones not layed off yet) with their multi-billion dollar bonuses. It is time for some criminal actions here.

2008 Nov 08 03:13 PM

[Steven Hansen:]

"This is unlikely to end anytime soon, and it is doubtful that president-elect Obama is going to be able to magically make everything better. We are in a recession and it is going to take time to rebound, so be prepared."

agreed. however, it will be the temptation of congress for a stimulus package for the consumer. stimulus packages needed to be timed towards the bottom of the recessionary cycle. if they are too early, they will be absorbed without reaping the benefit - and the economy will continue to fall anyway.

2008 Nov 08 09:32 PM

[whidbey:]

It is easy to get too pessimistic, but in this instance unemployment means lost consumer demand and that spells lost earnings. When earnings fall, stock prices fall and we enter a deflationary spiral. Volcker was good at inflation in the past, but this is a different problem. Economists do not know what to do with deflation. Helos with bucks from Ben is no answer but his silly remark emphasized how little we know about combating deflation. The Ice Age in Japanese equities is the laboratory for what does not work, but even Obama does not have a chance in breaking this spiral without also breaking the bank. Get nervous.

2008 Nov 08 09:58 PM

[vbierschwale:]

Folks, What do you not understand ?

Our unemployment reports are unreliable !

As for the automakers...
You need to read the article I wrote today at www.KeepAmericaAtWork.... that describes what the automakers have done and who should make the decision as to whether they get a bailout or not.

This article is titled "Another article about the democrats wanting to bailout the auto industry"

You also need to read the article titled "Save America"

Regards,

Virgil Bierschwale
www.KeepAmericaAtWork....

2008 Nov 08 10:23 PM

[Mowog:]

I've been in Japan for 15 years. My train fares still cost what they did when I arrived here. The USDJPY has been at $1=¥88 (¥70, if not lower, was predicted by "experts") and $1=¥133 (possibly even worse). Right now I prefer deflation to inflation because I like cash, in the bank. Inflation turns cash into paper.

2008 Nov 10 07:51 AM