Joblessness Drops? Hold the Applause 41 comments
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Optimists will seize on today's news that the unemployment rate slipped last month for the first time in more than a year. Good news, to be sure, if only because it breaks the formerly nonstop rise in the monthly jobless rate. But the modest decline to a 9.4% unemployment rate in July from 9.5% masks the ongoing job destruction that roars beneath this otherwise encouraging exterior.
Nonfarm payrolls were lighter by a still hefty 247,000 last month, the U.S. Bureau of Labor Statistics reports. That's reassuring only by the dire standard of the far deeper monthly losses between September 2008 and June 2009. Relatively speaking, the labor market appears to be healing, or bleeding less profusely, to be precise. But equating this with good news is a bit like discovering that your boat has only nine leaking holes instead of 12. You're still taking on water, albeit at a slower rate, but the end result will be the same unless the trend changes: the boat sinks.
Indeed, virtually every corner of the labor market was taking on water last month, including the major sectors of goods producing industries (which lost 128,000 positions in July) and the all-important services sector (which shed 119,000 jobs last month). Perhaps we should keep the buckets handy for a bit longer.
Nonetheless, it's important to recognize that the slowing pace of job destruction isn't chopped liver. Ideally, the trend continues and later this year we'll reach zero job loss. We expect no less in the coming months, short of a spectacular turn for the worse in the economy, which at this point looks unlikely.
The monetary and fiscal stimulus engineered by Washington since the crisis began has been helpful in slowing the recessionary forces, and some of that progress can be seen in the chart above. For another take on the improving picture in the labor market—i.e., the decelerating rate of bad news—take a look at the trend in ongoing fall in new filings for jobless benefits, as we discussed yesterday. Other encouraging clues include signs that the housing market may be bottoming out, if it hasn't already. These and some other trends suggest that Q3 2009 GDP will be flat and perhaps even post a small gain, thereby giving more support to the idea that the technical end of the recession is near.
But as we've been emphasizing for some time, the technical end of the recession threatens to be far less satisfying this time in the business cycle. To be clear, a jobless recovery of some magnitude may be looming on the horizon, and it may roll on for longer than the crowd expects. And let's be clear, robust growth in the labor market is essential at this point, considering that a towering 6 million-plus jobs have been lost since this recession began in December 2007. Without a revival in the jobs creation, the expected rebound in the economy is less than assured as a solution to what currently harasses.
Perhaps we're being overly pessimistic, although for the moment there's some reason for at least reserving judgment about the breadth and endurance of the approaching "recovery." Consider, for instance, our second chart below, which compares initial jobless claims and continuing jobless claims on an apples-to-apples basis. The divergence between the two in recent months is clear, namely, the decline in initial jobless claims has yet to be matched by a commensurate fall in continuing claims. The implication: while job loss is slowing, the mass of the previously unemployed are not yet finding work.
Granted, continuing claims tend to lag initial jobless claims, and so we shouldn't rush to judgment. There's still time for continuing claims to decline without yet raising warning flags. But the hour is late. This is already the longest downturn since the Great Depression and the economy's still bleeding jobs at more than 200,000 a month. At this late stage, even moderate bleeding digs us deeper into a hole that's already quite deep, making it that much more difficult to escape. The only solution is an even stronger recovery in the labor market, which at this point is open to some debate.
So, yes, we're happy to see that the unemployment rate fell a bit. But from where we stand, that's virtually irrelevant. As we've been discussing for some time now, the big challenge is still ahead of us. Staving off a deeper economic contraction was essential, and arguably that job is complete. But now comes the far tougher task of rebuilding what was lost. Unfortunately, quick and easy solutions total exactly zero.
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www.schiffforsenate.co...
Three minutes ago we got twenty holes in our ship.
Two minutes ago we got eight more
This past minute we got only three more holes....
To ask your own question, "Are you closer to getting the ship fixed?" Of course not. But the PACE of new holes is slowing, after all. That's good news. Time to party.
On Aug 07 12:11 PM davidbdc wrote:
> Another way to look at it is if your ship had twenty holes in it
> and you had fixed 8 and then you fixed 3 more.....Are you closer
> to getting the ship fixed?
>
> I say yes. So I'm happy that a few more holes were fixed and lets
> keep fixing!!
Not to forget the bubble of 'useless' former consumers, and belying that, the bubble of an over-populated planet...
On Aug 07 11:58 AM conceptwizard wrote:
> While there is much talk of a recovery on the horizon, commentators
> are forgetting some crucial aspects of the financial crisis. The
> crisis is not simply composed of one bubble, the housing real estate
> bubble, which has already burst. The crisis has many bubbles, all
> of which dwarf the housing bubble burst of 2008. Indicators show
> that the next possible burst is the commercial real estate bubble.
> However, the main event on the horizon is the “bailout bubble” and
> the general world debt bubble, which will plunge the world into a
> Great Depression the likes of which have never before been seen.
>
>
> There is still an enormous oversupply of housing, which means that
> the direction of house prices will almost certainly continue to be
> downward.” Foreclosures are still rising in many states “such as
> Nevada, Georgia and Utah, and economists say rising unemployment
> may push foreclosures higher into next year.” Clearly, the housing
> crisis is still not at an end.
>
> In May, Bloomberg quoted Deutsche Bank CEO Josef Ackermann as saying,
> “It's either the beginning of the end or the end of the beginning.”
> Bloomberg further pointed out that, “A piece of the puzzle that must
> be calculated into any determination of the depth of our economic
> doldrums is the condition of commercial real estate -- the shopping
> malls, hotels, and office buildings that tend to go along with real-
> estate expansions.” Residential investment went down 28.9 % from
> 2006 to 2007, and at the same time, nonresidential investment grew
> 24.9%, thus, commercial real estate was “serving as a buffer against
> the declining housing market.”
>
> At the end of March of 2009, Bloomberg reported that, “The U.S. government
> and the Federal Reserve have spent, lent or committed $12.8 trillion,
> an amount that approaches the value of everything produced in the
> country last year.” This amount “works out to $42,105 for every man,
> woman and child in the U.S. and 14 times the $899.8 billion of currency
> in circulation. The nation’s gross domestic product was $14.2 trillion
> in 2008.
>
> However, this “bailout bubble” that Celente was referring to at the
> time was the $12.8 trillion reported by Bloomberg. As of July, estimates
> put this bubble at nearly double the previous estimate.
>
> This is the real bubble, the debt bubble. When it bursts, and it
> will burst, the world will enter into the Greatest Depression in
> world history.
>
Oh yeah, joblessness not all bad when it's not you or your family. What you are describing is called structural unemployment but how do you cure that when we implemented policies and global corporate incentives to ship most jobs overseas except retail sales at big box stores? Innovation to create new industries that actually produce new products or services will take time and meanwhile the unemployed will pile up, draining tax dollars and paying less tax dollars--a double drag on the economy. Since this is not a cyclical recession but a structural change due to collapse of our debtor funded non-productive GDP of recent years, we are all going to be circling down the toilet bowl for the foreseeable future.
On Aug 07 06:09 PM mna wrote:
> Joblessness isn't all bad. It allows companies to pick up resources
> on the cheap, and forces those who aren't contributing to the bottom
> line to look for someplace where they can be better utilized. It
> also allows time for people to get retrained. Joblessness is only
> bad if the person getting laid off isn't proactively looking and
> bettering themselves in the meantime. Things will get better, you
> just need to be prepared for when they do.
On Aug 07 12:37 PM Mad Hedge Fund Trader wrote:
> I'm holding it. Looks like I am going to have to be the designated
> driver on this one. The Friday nonfarm payroll showing losses of
> only 247,000, with upward revisions to May and June, is signaling
> to many that the bull market is back. You might as well put a giant
> neon sign on your roof saying “party here tonight.” One can never
> underestimate the animal spirits here. I’m sure the newspapers are
> going to call the 0.1 % micro improvement in the unemployment rate
> to 9.4% as the beginning a major trend. But I don’t see any consumer
> spending on the horizon, and I was able to breeze through my favorite
> restaurant at lunch because it was still half empty. I think what
> is really happening here is that having priced in Armageddon in March,
> we are now pricing it back out. What’s an Armageddon worth? Some
> 3,000 Dow points, or 350 S&P 500 points, where we are right now,
> sounds like the right price to me.Let me know when you’re ready to
> go home, and I’ll pile your inebriated carcasses back into the car.
> I’ll even take the breathalyzer test.
Talk of recovery seems unrealistic.
On Aug 07 11:58 AM conceptwizard wrote:
> While there is much talk of a recovery on the horizon, commentators
> are forgetting some crucial aspects of the financial crisis. The
> crisis is not simply composed of one bubble, the housing real estate
> bubble, which has already burst. The crisis has many bubbles, all
> of which dwarf the housing bubble burst of 2008. Indicators show
> that the next possible burst is the commercial real estate bubble.
> However, the main event on the horizon is the “bailout bubble” and
> the general world debt bubble, which will plunge the world into a
> Great Depression the likes of which have never before been seen.
>
>
> There is still an enormous oversupply of housing, which means that
> the direction of house prices will almost certainly continue to be
> downward.” Foreclosures are still rising in many states “such as
> Nevada, Georgia and Utah, and economists say rising unemployment
> may push foreclosures higher into next year.” Clearly, the housing
> crisis is still not at an end.
>
> In May, Bloomberg quoted Deutsche Bank CEO Josef Ackermann as saying,
> “It's either the beginning of the end or the end of the beginning.”
> Bloomberg further pointed out that, “A piece of the puzzle that must
> be calculated into any determination of the depth of our economic
> doldrums is the condition of commercial real estate -- the shopping
> malls, hotels, and office buildings that tend to go along with real-
> estate expansions.” Residential investment went down 28.9 % from
> 2006 to 2007, and at the same time, nonresidential investment grew
> 24.9%, thus, commercial real estate was “serving as a buffer against
> the declining housing market.”
>
> At the end of March of 2009, Bloomberg reported that, “The U.S. government
> and the Federal Reserve have spent, lent or committed $12.8 trillion,
> an amount that approaches the value of everything produced in the
> country last year.” This amount “works out to $42,105 for every man,
> woman and child in the U.S. and 14 times the $899.8 billion of currency
> in circulation. The nation’s gross domestic product was $14.2 trillion
> in 2008.
>
> However, this “bailout bubble” that Celente was referring to at the
> time was the $12.8 trillion reported by Bloomberg. As of July, estimates
> put this bubble at nearly double the previous estimate.
>
> This is the real bubble, the debt bubble. When it bursts, and it
> will burst, the world will enter into the Greatest Depression in
> world history.
>
Be prepared for a very different America.
eye-on-washington.blog...
Keep borrowing and printing money, and you get more and more little green pieces of paper floating around. The only thing backing the value of little green pieces of paper is the idea that it can be traded for goods and services. Every job lost means means less goods or services flowing into the economy. It takes more and more little green pieces of paper to buy fewer and fewer goods and services. Pretty soon, people get the idea that little green pieces of paper are not worth anything. When that happens, you can prattle on and on all you want about economic theories, assetts and liabilities, banks, stock markets and anything else you want to. When people lose faith in little green pieces of paper to buy what they need-------they will find some other way to get what they need.
Just hope the some other way they find to get what they need is a gun.
It has happened before. Many times, and in many places. It happened in Russia, it was called the Bolshevik Revolution. Nobody even knows how many people died, somewhere around 20 to 30 million. It lasted about 40 years, 1905 to 1945. It happened in Germany,and led to a nice group of people coming into power----they were called Nazis. It happened in Italy. It happended in Spain. It happened in China, and everyone got litte red books to read. It happened in France and a lot of people got free haircuts.
History is on the side of the "doomsayers".
Party on. Let them eat cake.
I'm having trouble typing this morning.
On Aug 07 11:45 AM enigmaman wrote:
> Bad news- Your dieing
> Good News- Your dieing at a slower rate
>
> Long term prognosis- We will have to wait and see
>
> If the market is at fair value or even slightly over valued why would
> anyone want to buy into it at all at this point? Its not like we
> will come out of this recession faster and stronger then we entered
> it.
>
> Using the usual recessionary metrics to quantify what has been classified
> a highly unusual recession doesn't seem logical, especially when
> you factor in all the debt the Gov has or will add to its bottom
> line, and then we have the big gov tax revenue loss to factor in
> as well as so many other things.
On Aug 07 12:11 PM davidbdc wrote:
> Another way to look at it is if your ship had twenty holes in it
> and you had fixed 8 and then you fixed 3 more.....Are you closer
> to getting the ship fixed?
>
> I say yes. So I'm happy that a few more holes were fixed and lets
> keep fixing!!
On Aug 08 11:32 AM Fred Linn wrote:
> US Treasury reports that income tax receipts are down 22%. Coporate
> tax receipts are down 57%.
>
> Keep borrowing and printing money, and you get more and more little
> green pieces of paper floating around. The only thing backing
> the value of little green pieces of paper is the idea that it can
> be traded for goods and services. Every job lost means means
> less goods or services flowing into the economy. It takes more
> and more little green pieces of paper to buy fewer and fewer goods
> and services. Pretty soon, people get the idea that little green
> pieces of paper are not worth anything. When that happens, you
> can prattle on and on all you want about economic theories, assetts
> and liabilities, banks, stock markets and anything else you want
> to. When people lose faith in little green pieces of paper to
> buy what they need-------they will find some other way to get what
> they need.
>
> Just hope the some other way they find to get what they need is a
> gun.
>
> It has happened before. Many times, and in many places.
> It happened in Russia, it was called the Bolshevik Revolution.
> Nobody even knows how many people died, somewhere around 20 to 30
> million. It lasted about 40 years, 1905 to 1945. It happened
> in Germany,and led to a nice group of people coming into power----they
> were called Nazis. It happened in Italy. It happended in
> Spain. It happened in China, and everyone got litte red books
> to read. It happened in France and a lot of people got free
> haircuts.
>
> History is on the side of the "doomsayers".
>
> Party on. Let them eat cake.
>
On Aug 07 11:41 AM Angel Martin wrote:
> Household survey non-farm wage and salary employment was UP 100K+
> in July.
>
> The doomsters are going to have to come up with even more creative
> conspiracy theories to justify why this economic recovery is not
> real.
When the tax cuts go away, the revenues fall away, the deficit will shoot up and bond prices will rise steeply and well, you know the rest, equities fall and the clock is busted for good, or at least a long while.
Stop watching the paint dry and start looking for the new normal. It is called life on the edge of anarchy. You know who will be about the Queen except she has a lot of friends.