Putting Job Losses in Perspective

The U.S. Labor Department yesterday reported the labor market had performed considerably worse in June than had been expected. Non-farm payrolls (jobs) fell by 467,000, following a loss of 322,000 in May, whereas the unemployment rate edged higher to 9.5% from 9.4% in May.

The disappointing jobs report highlighted the severity of the downturn and suggested a bottom for employment is not near. As hopes of an economic recovery during the second half of the year dimmed, the stock market indices declined sharply for a third consecutive weekly loss.

Putting the job losses in historical perspective, Chart of the Day produced a graph comparing job losses during the current economic recession (solid red line) to those of the last recession (dotted gold line) and the average recession from 1954-2006 (dotted blue line). Strikingly, the chart illustrates that the current job market has suffered losses that are nearly three times as much as the average. As shown, if this were an average recession/job loss cycle, the number of jobs would have started increasing three months ago.

Source: Chart of the Day, July 3, 2009.

In a related video clip, Bill Gross, co-chief investment officer of Pimco, shares his reaction to the jobs report and the consequences for the U.S. economy.

The slide in employment is representative of what the U.S. economy faces for years to come, Gross told CNBC. A slow-growth scenario continues to play out as consumers who are losing their jobs or are in fear of facing unemployment cut spending and inhibit economic growth, said Gross.

Much like we saw with the Depression, attitudes change, and so consumers and investors will now become conservative savers as opposed to spenders. Spending as driven by asset appreciation in terms of houses … that game stops, that game has stopped and we must now move in another direction.

Source: CNBC, July 2, 2009.

Comments

[Moon Kil Woong:]

Anyone hoping that the general public would just cut spending for a few months and then go on spending bissfully ignorant of the fact they have nothing in the end are gravely mistaken. The government's choice to favor a slow decent into a recession over a quick bottoming (what they call a collapse) has grave consequences as does their choice to engage in QE.

Their choice go go further into QE leading to inflation and a decade long recessionary trench is a choice they will need to make. Personally I still favor letting the economy hit bottom and letiing capitalism do what is neccesary to reset the economy so we can experience an upcycle as opposed to constant yet a more stable recession.

Jul 03 08:10 AM

[Dave Wrixon:]

There is some merit in limiting the damage. Some companies that are viable in normal times are not viable in severe downturns. But again you need to have an understanding of what Normal is to make a sensible judgment. Getting back to normal is nothing like 2006. The new normal is going to be much closer to the 1970s and 1980s rather than anything we have seen recently, so we must all adjust our perception f recovery. Having said that whilst destruction is necessary, unnecessary destruction is not desirable. I think the big difference is that this adminstration just does not understand the issues. Zombie banks and Zombie car companies are being kept alive, whilst there seems to be little support for those activities that are essential to future recovery.


On Jul 03 08:10 AM Moon Kil Woong wrote:

> Anyone hoping that the general public would just cut spending for
> a few months and then go on spending bissfully ignorant of the fact
> they have nothing in the end are gravely mistaken. The government's
> choice to favor a slow decent into a recession over a quick bottoming
> (what they call a collapse) has grave consequences as does their
> choice to engage in QE.
>
> Their choice go go further into QE leading to inflation and a decade
> long recessionary trench is a choice they will need to make. Personally
> I still favor letting the economy hit bottom and letiing capitalism
> do what is neccesary to reset the economy so we can experience an
> upcycle as opposed to constant yet a more stable recession.

Jul 03 08:33 AM

[John Galt:]

When I look at your chart I see a red line that is still going down at a steep rate. Try and focus not only on how low that red line is going, but look at it in the contrast of time... 18 months and it's still going down. If you really wanted to throw in a curve ball, you could say that all of your data isn't even standardized since you are including data points from back in 1954 when unemployment was calculated differently than today.

Once our red line finishes going down will it go up in a ~45 degree angle like the average recession, or will we have the more "L" shaped employment recovery like the last recession?

There WILL be a change in attitudes. People WILL save more money ( the savings rate will go above 10%). If you thought this was going to be the tipical recession, just a short term hiccup followed by the orgy of spending you are in for a rude awakening. Think about it... attiude changes.

Americans are fat and in debt and no government can hold back the laws of economics. You can't hold back the ocean, and you can't stop the laws of nature.

Jul 03 09:32 AM

[bullljames07:]

The misguided $700B+ "stimulus" legislation has already crapped out: these figures are far worse than the ones the White House warned us about if we DIDN'T pass the bill- but it was passed, and still unemployment soars?

Instead of creating jobs, interest rates were bumped up, the dollar slid... and it didn't help anybody get any work. Much of this is due to the fact that Obama's agenda has mortified almost every machine of job-and-growth creation in the country. The Democrats had to insist and tax-n-spend, rather than a tax holiday for six months... can you imagine how things would be doing with a $700B tax cut instead?

And the One couldn't deliver the type of "temporary, targeted, and timely" bill that he promised for weeks. Irregardless of his beautified image in the press, Obama lacks the the political stature to control Pelosi and Reid... who hit the trough hard, while bickering like siblings.

But the lack of GOP co-conspirators exposed Obama politically... this legislation now looks to be a huge gamble. And when all this pork-n-welfare fails to generate any real economic gains... the Democrats could face a bloodbath in 2010.

One could make the argument that Obama knows his legacy will be in tatters by 2012, and could care less how much damage his radical programs do to the economy.... and is ramming through as much of his far-left agenda as he can before the day comes when people cringe at the mere mention of his name

Sure seems like it.

reaganiterepublicanres...

Jul 03 10:14 AM

[Fred Laurent:]

Was just wondering: can we really compare present and past recessions on the base of the unemployement figures?? The ratio between industry jobs and services jobs have changed a lot throughout the past 50 years. I m no economist and therefore I m may be naive but at first thought I would tend to say that industry jobs figures are the first to "recover" when situation improve while services still are hurt... Do not misinterpret my words, I m not saying that the situation has improved but that that comparing the couple (job losses - timeframe) is not necessarily relevant.

Jul 03 10:39 AM

[ain't no fo...:]

I'd be curious in what year the birth/death model got incorporated into the unemployment numbers. We had another 185,000 net "New" jobs ADDED to the economy last month, a statistic I find incredibly difficult to believe in this, the worst economic meltdown since the Great Depression.

And even more incredibly, in the past 5 months we have had 879,000 net "New" jobs added to the economy according to that model, which I find nothing short of preposterous.

So, as bad as the red line above looks, what would it look like if the lollipop kids who run the stats at BLS were a little more reality based?

Jul 03 02:55 PM

[Dave Wrixon:]

I would tend to agree.

I don't think anything short of Civil War is going to get employment back on track anytime soon.


On Jul 03 10:39 AM Fred Laurent wrote:

> Was just wondering: can we really compare present and past recessions
> on the base of the unemployement figures?? The ratio between industry
> jobs and services jobs have changed a lot throughout the past 50
> years. I m no economist and therefore I m may be naive but at first
> thought I would tend to say that industry jobs figures are the first
> to "recover" when situation improve while services still are hurt...
> Do not misinterpret my words, I m not saying that the situation has
> improved but that that comparing the couple (job losses - timeframe)
> is not necessarily relevant.

Jul 03 02:56 PM

[Dave Wrixon:]

In fact that is a brilliant idea. If you could stage the main theaters of combat in those areas with the worst Real Estate bubbles, and set the terms of engagement to wreak the highest collateral damage to infrastructure, you could have the property market back on its feet in less than two years!


On Jul 03 02:56 PM Dave Wrixon wrote:

> I would tend to agree.
>
> I don't think anything short of Civil War is going to get employment
> back on track anytime soon.

Jul 03 02:59 PM

[Swashbuckler:]

I reside in a small southern city. This morning's local daily newspaper has 8 pages dedicated strictly to foreclosures. More copy than the sports section, the business section, lifestyle section. By far the largest section in today's paper is this section with legal foreclosure listings. And the headlines on the front page are big block letters about unemployment. Hard for me to swallow any of these articles that have popped up in MSM about green shoots, and things getting better. Can't buy it.

Jul 03 03:36 PM

[Fighting Yoda:]

The job report was worse than the headline:
- once again the birth/death nonsense – added another 185K jobs ( +220K last month), has added a total 870K jobs in the last 5 months
- The average work week declined by another .1 hour to 33.0 hrs – all time low. A .1 hour decline amounts to about 350K jobs lost
- Part time workers decreased slightly(still at 9 Mi), over time decreased, diffusion index went lower – all pointing to no chance of hiring increase

Jul 03 05:12 PM

[dcb:]

The Obama administration has taken a tactic directly from the bush administration. keep telling lies, on top of more lies and attempt to create your own reality that the public buys into. Of course having gotten that for 8 years the public is a bit wiser to the game and "green shoots" has lasted about 3.5 months.

While the media continues to buy into the government line, the people hopefully aren't. hence you saw the drop in consumer confidence. "fool me once shame on you, fool me twice shame on me"

Jul 03 05:26 PM

[markfl:]

Weekly earnings fell also. This is showing "slack" in the labor market. It is the same rationale as capacity utilization, and suggests that business still feels it has excess capacity. They'd utilize their existing help more fully before adding new hires (due to per capita benefit costs). Those working part-time due to "slack business conditions" went up again for the fourth month. Business is not seeing demand "pull" them to any degree that they need more labor to meet demand.

On Jul 03 05:12 PM Fighting Yoda wrote:

> The job report was worse than the headline:
> - once again the birth/death nonsense – added another 185K jobs (
> +220K last month), has added a total 870K jobs in the last 5 months
>
> - The average work week declined by another .1 hour to 33.0 hrs –
> all time low. A .1 hour decline amounts to about 350K jobs lost<br/>-
> Part time workers decreased slightly(still at 9 Mi), over time decreased,
> diffusion index went lower – all pointing to no chance of hiring
> increase

Jul 03 05:38 PM

[ed233:]

If being employed as a census recorder counts for employment then you can say the Obama policies for increasing employment is a success. Or if giving aid to municipalities to cover the payroll for policemen and fire fighters then you can say perhaps that the Obama policies are working. Would these people have a job without the tax payer? Let's not kid ourselves. Where does the money come from to pay for those salaries. I have to say it, "It's the private sector!" The real employment, the meaningful employment comes from the private sector. It is that area that contributes to productivity which in turn increases employment. Need I say it again. It is the small businesses throughout America those that work their buts off that is the big employer. I know Mr. Obama has never worked in the private sector but for God's sake will someone tell him. If credit is denied to this sector which it is then how is it going to be possible for a sustained recovery to take place if they are the future employers. Creating governmental and quasi-governmental auto workers in areas that were bankrupt is to replace the natural cleansing of inefficiency with government aid in an already defunct sector. It is to go against the grain of economic efficiency. Let capitalism do its work. Government aid will not change the economic will by supporting a group of political workers at the expense of would-be productive innovative enterprises. Government run factories have never succeeded so why do modern thinking politicians think otherwise? Why doesn't someone wake up in Washington. Are they all that stupid? LOL Looking after your money.

Jul 04 12:38 AM

[Paul in Texas:]

ed233, interesting comment. I read somewhere that public sector jobs went up by at least 600,000 over the last year. What would the employment numbers look like if we took out the public sector jobs? What is the private sector unemployment rate?

Jul 04 10:36 AM

[Red Esprit:]

Great article and the Gross interview gives insight. Not so sure about his assessments of averting a depression or depression styled economy but his opinion carries significant weight so what can he really say. There are simply too many chips stacked against us at this point. I remember when Clinton espoused the glorious future of the U.S. as a service economy and what a fool I thought he was. A service economy works fine for the Caymen Islands. We, on the other hand, are now enjoying the fruits of those that believed the wholesale decimation of manufacturing was acceptable. This, of course, includes the union socialists. But you cannot dwell on the past. You must look towards the brightness of the future. The stimulus program will surely begin to create more jobs...well, maybe not. With massive taxpayer investment, banks will obviosly begin to ease the current trend of consumer credit contraction...well, maybe not. Surely, states like Califronia (the world's 8th largest economy) will reign in their entitlements, deport the illegals, curtail their socialists retirement benefits programs for state employee unions, and balance their budget....well, maybe not. No worry. The world will continue to support our Keynesian styled deficits by purchasing treasurys at 2% rates forever...well, maybe not.
So the truth is that this recession, just maybe, is not your typical recession. Inquiring minds would ask...if jobs will lead us out of the recession, just where will they come from? Clearly not from the manufacturing sector. Its gone to a hammer and sickle. Clearly not from technology. What technology can possibly be brought immediately to bear? Maybe form Clinton's service sector. Maybe we simply all buy maid franchises, clean each other's homes and pull ourselves from the brink of depression with the help of some janitorial "circle jerk".
The reality is that a depression can no longer be ruled out. Discounting it is totally for the foolish. The fundamentals of our economy are no longer sound. We derive 97% of our tax pool from 50% of the populace. The upper 1% pay an astounding percentage. That 50% is earning 30-35% less taxable income due to the economy and job loss. Taxing the "rich" is simply getting harder to do. You are no longer facing the "Great Unwind"...you are experiencing it. How you stop it, is anybody's guess. We simply have no credible fiscal leadership....anywhere... any level. Pelosi, Reid, Frank, Dodd, et al. There has never been a time in American history where the leadership of the US has been in the hands of greater incompetance, ineptness and corruption. Obama is set to pattern himself after FDR. He will likely succeed, unknowing that FDR and his policies fueled one of history's great economic failures. Our "skin in the game", "green shoots", great orator, is one with no credible solutions. Sound familiar? Unfortunately, the die seems to be cast and we are all along for an incredible ride. Those that compare this to the Great Depression, just may be wrong. In the end, we may want to re-define the 29 version, as simply a major economic downturn in light of what we currently face. Now....back to re-potting the daffodils. Its a beuatiful day in Florida.

Jul 04 11:54 AM

[cross:]

"Imagine what would happen with a 700 B tax cut instead" (???????)
You have a short memory. We don't have to 'imagine'. We can simply look at the tax cut (a much larger one, by the way) enacted by w earlier in the decade. What were the results?
Continuing job losses for a couple of years followed by several years of anemic job growth (remember that the economy has to create 150,000 jobs a month just to keep the emplyment rate even)
republicans have once again managed to confuse the public with this unending rant against "government spending" instead of focusing on the crisis at hand. Something is missing from the U.S economy. What could it be? Oh, I know! It's CONSUMPTION BY THE PRIVATE SECTOR!!!! Government spending seeks to replace some of that (infrastructure, much needed, grants to keep public sector workers receiving their paychecks (when you have a fire, or 911 emergency, you do want someone to help, don't you? Or are you one of those 'i don't need the government's help (in theory) kind of guys?
Really, I have to believe that the conservatives on this board and others must be setting up a tape recorder in front of the tv/radio so they can simply record the dumb-bunny republican talking points coming out of rush, beck, et al and regurgitate them back to the public. It allows them to express themselves without the painful step of thinking about it all first.


On Jul 03 10:14 AM bullljames07 wrote:

> The misguided $700B+ "stimulus" legislation has already crapped out:
> these figures are far worse than the ones the White House warned
> us about if we DIDN'T pass the bill- but it was passed, and still
> unemployment soars?
>
> Instead of creating jobs, interest rates were bumped up, the dollar
> slid... and it didn't help anybody get any work. Much of this is
> due to the fact that Obama's agenda has mortified almost every machine
> of job-and-growth creation in the country. The Democrats had to
> insist and tax-n-spend, rather than a tax holiday for six months...
> can you imagine how things would be doing with a $700B tax cut instead?
>
>
> And the One couldn't deliver the type of "temporary, targeted, and
> timely" bill that he promised for weeks. Irregardless of his beautified
> image in the press, Obama lacks the the political stature to control
> Pelosi and Reid... who hit the trough hard, while bickering like
> siblings.
>
> But the lack of GOP co-conspirators exposed Obama politically...
> this legislation now looks to be a huge gamble. And when all this
> pork-n-welfare fails to generate any real economic gains... the Democrats
> could face a bloodbath in 2010.
>
> One could make the argument that Obama knows his legacy will be in
> tatters by 2012, and could care less how much damage his radical
> programs do to the economy.... and is ramming through as much of
> his far-left agenda as he can before the day comes when people cringe
> at the mere mention of his name
>
> Sure seems like it.
>
> reaganiterepublicanres...

Jul 04 12:35 PM

[nmelendez:]

I believe every is confused...it's not green shoots...it's green shi* :)

Jul 04 03:03 PM

[whidbey:]

Whatever we might think of Gross, he is being candid. It is a different world that is arriving. We will live less sumptuous lives, reinvent the savings bank which pays interest, and likely lower the GDP of the US over the next decade to negative growth, no growth and low growth. This plus the government debt binge and major reforms in social programs well create a new middle class consisting of about 70% of the population who will bear the burden of the wall street debacle . 30% of the population will continue to have some income growth from innovation. It is not hopeless, but it will about as much fun as watching paint dry. The boomers will die disappointed with their new President.

Jul 04 03:39 PM

[Stu in SDGO:]

What we think of Gross is this: he's delusional. Tax cuts are the only known economic stimuli that work - and they work every time they're tried. Tax (or borrow)-and-spend - and the associated corruption - is what got us into the present predicament. Here's the solution to the current crisis:

1. Rescind all bailouts/stimuli, with interest. No exceptions.
2. Allow bankruptcy laws to work as they have for the last 50 years (pre-Obama).
3. Cut gov't taxes across the board (at all levels of gov't).
4. Cut gov't spending to the bone (actually reduce outlays at federal, state, and local levels from 2008).
5. Drill and dig everywhere for oil, gas, and coal. Crush environmentalist lawsuits aimed at stonewalling energy production.
6. Build at least 50 nuke power plants across the nation. Open Yucca Flats immediately.
7. Build 10 new oil refineries in the continental U.S.
8. Provide tax breaks for new business development.

And watch the economy zoom!

Jul 06 04:35 PM