Today’s jobless claims number was higher than consensus estimates and a surprise to many.
They should get used to it – jobless claims will rise for the rest of the year. Why? Let’s walk away from statistics and modeling for a minute – I am qualified to do so, I worked on my first computer model of the economy in 1977 and they are not more accurate now then they were then. Let’s look at the real world.
- Small business is the engine of job growth and small business confidence hit its lowest level ever in the most recent Wells Fargo/Gallup poll. They are not hiring.
- The back to school retail season is just about over with tax holidays in several states scheduled for this weekend. When this season ends so do many retail jobs.
- The tiny push given to build new homes by the federal tax credit ended in July, more foreclosed homes are entering the market and home residential construction is going to get even worse. The home building rate is now less than one fifth of peak new construction – and between 2002 and 2007 more than 40% of all new jobs were tied to residential construction.
- States are $84 billion in the red; the Feds will probably vote, in September, for $26 billion in relief; a good deal of the shortfall is going to be in layoffs and eliminated positions.
- States are accelerating early parole for many inmates, soon to hit the unemployment rolls. Perhaps as many as 100,000 people in the next three months. No kidding.
On top of all this, summer is the season when the newly unemployed do not look as hard as they will – the newly graduated do not look as hard as they will – and summer is ending. The ebb and flow of the US is still built around a farm economy with peak effort beginning in September as the harvest comes in, school begins and retailers prepare for a dismal Christmas season.
For those if us who live in the real world, we are already in a double dip recession and rising claims will not surprise us. Eventually the market will catch up.