Unemployment Falls in 16 States; Steady in Seven Others

Since early May we've continued to reference the peak and then improvement in new claims for unemployment. This past week was no exception. As recovery takes hold more and more states are seeing encouraging labor situations.

In states around the nation's capital unemployment is falling or holding steady.

Maryland's rate has remained at 7.2 percent since June. In Virginia, the rate has now dropped to 6.5 percent in August from 6.9 percent in July.

William F. Mezger, chief economist for the Virginia Employment Commission, said job claims were down as the pace of layoffs in his state decreased in August. "We had over 7 percent unemployment in June," he said. "We probably won't see it again in '09 the way it looks."

Nationally the report this week showed that initial claims fell another 12,000 in the Sept. 12 week on top of the surprising 19,000 drop in the Labor Day week.

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With unemployment rates now falling in 16 states, the confidence spike should continue with consumers, small business, builders and investors.

Comments

[Mad Hedge Fund Trader]

cnd With the collapse in employment, it is all about “location, location, location.” No surprise then that Michigan leads the country with a 15.2% jobless rate caused by the implosion of the auto industry. Detroit is suffering a horrific 17.3% rate. Nevada came next at 13.2%, blasted by both barrels of a shotgun by simultaneous layoffs in housing and hotels. Rhode Island at 12.8% took big hits in health care services and tourism. My home state of the “Land of Fruits and Nuts,” California, now has a 12.2% jobless rate, the worst in 70 years. Housing was the grim reaper here, and now 20,000 teachers have started collecting unemployment checks, thanks to our bankrupt state government. Who has the lowest unemployment rate in the nation? Sunny North Dakota at 4.3 %, where healthy agriculture and energy industries kept people in work, and ranking 48th in population, have almost no people to fire anyway. It also helps that the “Roughrider State” was completely bypassed by the subprime boom, and for many years was the cheapest place in the country in which to own a home. To get unemployment back to a normal 5% rate, Obama has to create 20 million jobs by the next election in 1012, one tall order.

2009 Sep 21 09:53 AM

[Mark Bern]

So, with initial unemployment claims falling in sixteen states and level in six, that would leave "only" 27 states with rising unemployment. Is that really such good news? Maybe it is, maybe it isn't. If unemployment claims rise again in some of those "improving" states in coming weeks, would we declare defeat? No. What matters is the overall trend. There will be temporary improvements here and there and have been all along. When we can write that less than half the states had rising unemployment claims for several weeks in a row, then we have a new trend. I would really like to see the beginning of that trend, but thus far I can only withhold my enthusiasm over such non-events as reported by the author.

2009 Sep 21 10:09 AM

[doubleguns]

I am waiting for Jan-Mar 2010 for the true"tell" when stimulus dollars (cash4clunkers and mortgage help) as well as holiday preparations are no longer in play.

2009 Sep 21 10:26 AM

[HardwoodFlooring]

And if banks were lending to small businesses we would be talking about a real recovery...

The reason that inventories are being rebuilt is that businesses don't have access to credit to rebuilt inventories. Because the recession has prolonged for such a duration they are also short on working cap to rebuilt those inventories on their own. As a result, no credit and little cash on hand, they cannot build inventories to get commerce going.

Without that don't expect dramatic improvement in the economy. It's lending stupid...e.g. business can't get credit to improve cash flows and crank GDP.

There is an important component to GDP. That is this- a manufacturer sells a product to a distributor for $100. That product is then bought and sold by the distributor for $100 and sold for (say 20% more) $120. There has been $220 of GDP created. This compounds as it gets down to the consumer.

However, the reason this economy, and GDP, for that matter cannot take off is that businesses- small businesses like a $100 million dollar distributor are being strangled by their stupid regional bankers. The reason is that regulators are hounding regional banks demanding more loan loss reserves and as a result creating a negative feed back loop to the broader economy.

When will these stupid bastards (government and banks) understand that they are wrecking business NOW. There is no hope for a recovery ever unless people are allowed to do business and idiots stop thinking that they can run these businesses better by pounding down on them.

If lending were to return to this economy then we would see double digit growth in GDP- it would take off like a rocket. But good businesses can't get credit right now. It's a disaster.

The story that is not being told is the story of small business. Small business is a fragmented and disparate group, yet, every small business owner I talk to is saying the same thing. “the bank is on my ass, they have cut my credit line, they are standing on my chest telling me that I need to reduce inventories but the reality is they are not here in the trenches fighting this fight. The more pressure they put on me the harder it is for me to manage my business.” The economy cannot recover without Credit- The belief that you will get paid back for your indebtedness.

Just an anecdotal story. In 2008, if you were in a a housing related industry and with a big bank- US BANK, WELLS, etc- you were kicked out. Here I'm talking about plumbing distributors whatever. This meant that you were forced to a smaller regional bank. In the process fo the shift your credit line was probably shrunk.

As a result of that you are forced to go to JIT inventories etc. This gives you NO competitive advantage over any other competitor. As such, you start to see margin erosion. You try and explain to your bank that you need a credit line increase in order to maintain market share and they say- "your cash flows don't justify it". You say, "well it's a chicken and egg proposition, I have to have the inventory in order to increase my cash flows".

It's a goddamn disaster out there. The whole thing has gone so well beyond delveraging and is grinding to a halt.

Manufacturers rely on distributors/dealers to get products to market. If distributors can't get access to capital to trade goods then the system breaks down. That is what is going on.

The reality is that distribution, no matter what it is, is a business that relies on a 22% GPM with operating costs (SG&A costs) that run 18%. It's thin margin. When you get price pressure, as a result of the competitive forces, then ontop of that you get volume decrease this equals commerce/profitability arrest.

NO CREDIT- NO BUSINESS.

If you want manufacturing growth to return credit has to get back on the street. Manufacturers cannot become the creditors of their customers. The system needs to work and in order for it to work banks have to start lending again and taking some bloody risk. It's called credit- derived from the Greek "belief": the belief that you will get your money back eventually.

Right now, I hear the term "banker" in the same vain as I hear the word "lawyer". If the sentimate towards bankers today isn't the same as it was during the great depression well, then, it's damn close.

Is sum, there are serious inventory shortfalls out there. If you were to try and build a facility right now your building would be out 6-8 months. Equipment and Electric are way out, ironically you would thin with things being as slow as they are that companies would be dying for business and service levels would be up but that is not the case.

But there won't be a huge inventory build becasue companies can't get lines of credit to build inventories so they can have products to sell. The system is all gummed up. Without credit to build inventories manufacturers can't gear back up and put people to work. Distributors cannot justify putting outside sales people back on the street. This is stifilling all matters of commerce including product innovation.

If you want to get a new prodcut to market that takes a massive amount of capital- bank or other wise. The reality is that no distributor wants to take on a new prodcut becasue they have no available credit to do it- bring in new products means investment in merchandizing AND new inventories.

I'm telling you until the banking system starts to work again this country is screwed.


So, one of two things or both need to happen: 1)the banks need to start working with customers no matter what. 2) the regulators have to get off the banks asses and let them work with customers instead of against.

If banks continue to pound away at small business the problems in this country will only conintue to be exasperated. It becomes a negative feed back loop that is where we are today- however, no one is talking about it it is the story that isn't ever told because small business is not one unified voice but, rather, small and unheard.

2009 Sep 21 01:32 PM

[Dave Wrixon]

How can banks make loans? The only collateral they understand is Real Estate which is totally screwed. Do you seriously think any of them have the intelligence to be able work out good business propositions from bad ones?

2009 Sep 21 02:12 PM

[HardwoodFlooring]

Dave not sure I understand. Banks make loans to businesses based on "credit"- the belief that they will get paid back. Or at least that is what they are supposed to do- that is the business model. For that they get a risk premium- this is called interest. Business loans are what fund growth, opportunity and entrepreneurship. We didn't invent it- it's been apart of the world since men were making small rocks from big rocks.

The problem today is that they aren't paying attention to the fundamentals of their business- nor keeping in context why they are in businesses....

2009 Sep 21 03:23 PM

[Donald Ingram]

Good news - You are looking at the economy through a keyhole! How about opening the door and looking at the complete picture?
It's not a pretty picture as you would have us believe. Stop spinning and tell it like it is! Do work for main stream media? If not you should, since that's where the spin is.

2009 Sep 21 04:24 PM

[jerrydd]

Another rosy forecast that lies. He leaves out many details like 2/3 of the states are still increasing unemployment. Plus M6, the real measure is at 16.8% as it use to be measured before the pols 'corrected' it..

Now add they need to increase jobs 130-150k/month just to keep up with population growth and how many never got jobs during the Bush yrs as increases only averaged 1/2 of what was needed to break even and things are rather bad.

Next before jobs can get better late next yr oil will start rising back to $140/bbl+ and throw us back into recession and it just does not look good.

2009 Sep 22 09:42 AM